By Colbey Pfund, co-founder of LFNT Distribution
As the old question goes, “If a tree falls in the woods, and no one is around to hear it, does it make a sound?” Well, I want to update it: “If you have a great product, but no one knows about it, then what’s the point?”
I’m proud of my e-liquid, so I want to get the word out to my demographic. How else will they know about it? But budgeting for marketing can be tricky, especially for a small business, so I have to switch my trucker hat for my thinking cap or else I might rush into spending too rashly.
So what is the right amount to budget for marketing when you own a small business? Should you focus on ads or public relations? I'm going to break it down for you.
Advertising vs. PR
Before I get into how to budget, let me define my terms. Advertising is what you project to the world, as in a social media ad that says, “Hey, check out my new e-liquid.” PR involves more of a subtle dance with the community. You want to interact with your consumers and get them to fall in love with your product, and then they can tell the world how awesome it is.
Case in point: Spending money on a billboard at a music festival is advertising, but showing up at the festival and giving out samples is PR. By interacting directly with the public, you can create a buzz. Who knows? You might even make a splash in the local paper, which creates another wave of PR momentum.
Setting Your Budget
When it comes to marketing, you usually get what you pay for. It’s a numbers game, and it scales to fit the size of your business and the scope of your growth. According to marketing communications consultant Caron Beesley in a post on the U.S. Small Business Administration's blog, many businesses set aside 2-3% of their revenue for "run-rate marketing and up to 3-5% for start-up marketing." The percentage can vary by industry, the size of your company and what stage it's in, of course. Retail businesses in their early years, for example, spend as much as 20% of sales on marketing. After all, you’ve got to create a spark before you can ignite your dreams.
Setting a marketing budget can be different for small businesses like mine. "As a general rule, small businesses with revenues less than $5 million should allocate 7-8% of their revenues to marketing," Beesley writes. That number might even double when you’re first building your brand to account for trial and error, video production and other ancillary factors.
PR is an entirely different beast from advertising, even when it comes to budgeting. Ideally, PR and advertising should each have their own individual budget. I recommend testing some advertising and PR strategies to find out what works best for your brand before you decide how to divvy up your budget. Try putting a small advertisement in a magazine that shares the same customer base as your product.
Or better yet, think of some free or low-cost PR options. In my case, extreme sports events, car shows and concerts are all places where I've created some word of mouth by showing up and introducing my product to attendees.
Is It Working?
This is a question to ask early and often as you determine how to allocate your marketing budget. Check the data on where the traffic to your website is coming from and how much of that traffic is converting to sales, and then assess your return on investment before heavily investing in any specific advertising channel or form of PR. If people are seeing your social media ads but ignoring them, for example, then they’re worthless. Ditch the lower performing ads, and determine where your advertising dollars may be better spent.
In conclusion, budgeting for PR and advertising is a testing and assessing game. Some products resonate with people through PR better than they do through an advertisement, but in my experience, trial and error is the best way to find out where you should be spending your money.
Colbey Pfund is co-founder of LFNT Distribution, a leading international distributor of premium eliquid.