Marketing: what’s the right amount to invest in yours?
With the worldwide recession still upon us, there are bound to be mixed opinions on how much to invest in your annual marketing spend.
Some will tell you to keep outlay fairly low – after all, in many markets, consumers are not currently spending as much as they used to. On the other hand, others will advise you to put decent money into marketing – for only by getting your message out there can you hope to succeed where others are failing.
So who’s right? Well, perhaps the first question to ask is a relatively simple one: how much do other companies the same size as yours spend – and what exactly are they getting for their cash? Again, this can be a hard one to answer, as it can really depend on your marketing agency and whether you commit to a long-term contract or pay them on a project-by-project basis.
The bottom line is, it’s essential to have a set budget (and to stick to it). By doing this, you can base it around a definitive marketing plan, which will then make it far easier to track specific return on investment (arguably the number one priority of most marketing clients in these days of having to make your funds go further than ever before).
Once you’ve got your plan in place, it’s time to look at your marketing spend in terms of the percentage of your incomings. Do you commit 5% of your annual intake? Or how about 10%? Or even more? Different industries have different ways of calculating just how much is the right amount. So, once again, what’s right for you will depend largely on what you are selling and who you are selling it to.
Which brings us onto your target audience. Who are they? What are their buying habits? Are they being cautious with their money? Or are they throwing caution to the wind and spending freely? Of course, you could take the stance that you already have a loyal customer base and so don’t need to go out and win more. Fair enough, but a word of caution – customers can be unpredictable. Circumstances can change. By investing in your marketing spend today, you can reap the benefits now and in the future too.
Which brings us full circle back to the question in hand – what amount is the right amount to spend on marketing each year? The simple answer would be to look at your competitors, your turnover and your customers. It’s usually a pretty good place to start. It really is only a start though and some would suggest it is better to consider the lifetime value of a customer to your business. From there you can identify just how much you would be prepared to spend to get that customer.
For my part, with over 20 years’ experience in marketing, I wouldn’t suggest looking at what your direct competitors are spending, unless you want to become just like them, which I imagine you don’t!
What you need is a clearly thought through Marketing Strategy and Plan that:
- aligns with your overall business goals – let’s face it, if you want to grow quickly, you’ll need to invest more in marketing
- identifies who your ‘best’ customers are and considers the best way to get more customers just like them
- considers the products or services you offer and modifies them where necessary
- identifies and modifies where necessary the pricing of those products and services
- looks to develop a unique position in the market and then
- uses a variety of communications channels, both inbound and outbound marketing, to reach customers and prospects and perhaps most importantly
- has clearly defined objectives.
And whatever you decide upon, make sure you track your activities, measure results and look to identify the return on investment. Then and only then, will you know what is working for you and be able to modify your marketing activity so that you generate the most leads and sales for the lowest investment.
