You now know the marketing activities you need to do to reach your identified audience. Now to cost it.
This is so important. Even when we are with a client to discuss marketing strategy, when we ask about budget, the standard answer we get is either “we don’t have one”, or “I’ll have to check what it is.” You wouldn’t buy a car or go on holiday without having a good idea of what a viable spend looks like.
If you’ve planned your marketing and it’s not just a knee jerk reaction to the phone not ringing, then you should have time to put a comprehensive budget together.
Treat your marketing budget as any other investment. Be driven by how much Return on Investment you want/need to achieve from it.
If you want a benchmark, there are reports out there which will give you average marketing spend for specific industries, as a percentage of turnover or gross profit (GP).
Between 5-15% of revenue seems to be the acknowledged rule of thumb. However, there is a reason why this step is last. We don’t want you to spend your promotional pound just for the sake of it. Everything you spend should be fully justified and inline with the rationale built from the previous 9 steps of this plan.
We have worked with businesses spending far less than 5%. Ten times less in fact (at around 0.5%) for one such business spending about £25,000 yearly on marketing, whilst turning over around £5M. At the other end of the spectrum, we have worked with start-ups which re-invested nearly 50% of their first-year revenue in marketing.
How to get the numbers. Start with the known numbers - your historic marketing spend - and then take the time to compare the market.
This is important as we’ve worked with clients who haven’t tested the temperature of the market and it’s been eye watering how much they have paid.
Networking is a very good way of finding out about who’s good and what the going rate is for marketing goods and services that may be new to you. If you’re referred into a supplier, and they are known and respected on the networking circuit, there’s a better chance you will be looked after.
As emphasised in Step 9, keep track of how much you’re spending on marketing. The more granular you get, the more data you can use to inform your future spend. Don’t be afraid to drill down deeper with the marketing suppliers. Keep ensuring that you are getting what you’ve paid for.
Sadly, there is no one size fits all formula for calculating your marketing spend. Use Steps 1-8 to make educated decisions regarding strategy and then keep tracking ROIs and improve them.