The Answer – It Depends.
If you’re a company that has a marketing plan in place every year with goals, objectives and strategies, then this post isn’t for you. It’s for all of the owners and managers of businesses, from $1MM in revenues to $50MM, that have never had a marketing plan in place and want to make the leap into hiring an advertising agency or a marketing consultant for the next stage of their growth.
In my experience, most companies have no idea what to do at this point. Once you’ve built a website — the one thing that even the most tech-challenged know is necessary now — you might assemble an e-mail list, but then what? Those with no experience in marketing may not know what questions to ask, or even what a marketing plan is.
The important thing to realize here is: There’s nothing wrong with that. You’ve invested your time and energy in learning about your industry and your sector of the economy. No one can master every subject while building a business. But it’s this — completely understandable — lack of knowledge that holds many people back from activities that can greatly benefit that business. Some people are uncomfortable admitting to a marketing professional that they don’t know much about the subject, and some believe being honest will open the door for a marketer to take advantage of them, profiting at their expense.
When agencies and marketing professionals ask, “What’s your marketing budget?” it’s not a trick question. The most common response is “How much do you think it should be?” In a way, that’s appropriate. The marketing professional is there to help you focus your identity, construct a plan, and budget accordingly. The main point is that the marketer isn’t there to tell you what your budget is. They’re there to help you figure it out.
Because the answer is … IT DEPENDS!
What does it depend on? A lot of things. Here are a few factors to consider when establishing a marketing budget:
What are your goals and objectives?
Starting here will help you and your marketing/advertising firm figure out what you need and what it’s going to take to get you there. Even if you don’t have a marketing budget at all, this is the stage where some spending can have the most impact, in the form of several consultation sessions to figure out some of the basics.
What does developing a plan involve?
If you have a solid client base and want to promote additional products and services to your current customers, your task is going to be straightforward compared to a company that needs to constantly refill a sales pipeline. It’s easier and less costly to get current clients to spend more than to identify and attract new clients. But maybe you’re trying to do both, recognizing that the two goals require different approaches. A good marketing professional will recommend tactics to reach your goals and areas where your money will produce the best ROI.
To get more business from current customers, you might consider email blasts, direct mail, a newsletter or a loyalty program. A survey is a good place to start. Are your clients happy with your company? Are there any problems they’re not telling you about? Are they interested in services that you don’t provide but could? The main idea is keeping your name in front of the members of this group, establishing a deeper rapport with them and reminding them of all the products and services you offer.
Gaining new customers will cost more. What is the value of a customer to your business? How much are you willing to pay to get one? How competitive is your industry? How many new customers do you need? These questions will help you determine how much you will need to spend to achieve your goals.
You might not be able to do everything you want at the same time. A marketing professional can help you identify the most cost-effective way to gain new business. Then you can build on it over time.
Which basic materials do you have, and which do you need?
Do you already have a website that works for you but could benefit from an update? Or are you dissatisfied with it and looking to build something more contemporary from scratch? Are you using the right marketing materials?
Once you’ve defined your goals and objectives and developed a basic plan, your marketing/advertising firm can identify the appropriate tactics, which will indicate the materials you’ll need.
It’s important to be realistic at this stage. A new website will cost more than a revision. You can have a freelancer build you a WIX site for about $1000, but it probably isn’t going to impress as much as a custom website can. And if you need a site that incorporates specific functions, or if you want to allow customers to purchase online, you’re going to have to spend more. And it might be a lot more.
If you’ve got a marketing plan in hand that you feel good about and you’re ready to spend to execute it, your materials should be professionally prepared so you get the most out of your budget. You can show up at 10 trade shows or spend on pay-per-click ads, but if your materials look amateurish next to your competition’s or your message doesn’t resonate with your target audience, then you are wasting your money.
After all these years, I still encounter clients who don’t blink an eye at spending $50,000 on television time or square inches of print but complain about paying for the creative work that produce content to fill those empty spaces. Without a message and some ways to draw attention to it, these efforts are at best forgettable, or, worse counterproductive.
Again, this is not an argument for uncontrolled spending. Production expenses are often one-time costs, and most of the results can be reused or repurposed. A few good promotional materials upfront will give the rollout more impact and make future efforts easier.
What do I do first? And what do I do after that?
When clients finally make the decision to develop a marketing plan, they often want to do everything at once. At this point it is far too easy to spread money across too many tactics simultaneously, reducing the impact of all of them. Establishing priorities will help you figure out how much will be needed to execute each tactic EFFECTIVELY.
For example, you might decide to pursue both pay-per-click and radio, but if you can get more exposure by putting the bulk of your budget into pay-per-click, then do it. Ask which approach will give you the most bang for your buck, and then spend there until you reach a point of diminishing returns. Be patient, and don’t be afraid to experiment. If something works, keep it up. If it doesn’t, get rid of it.
What’s the takeaway?
Don’t expect to give anyone a marketing budget or have someone recommend a budget unless you have at least discussed your goals, objectives, strategies and existing or needed materials. Your advertising/marketing firm knows the specific questions to ask to get the information they need. They’ll use those answers to help you determine how much you’ll need to spend to get the results you want, or what kind of results you can reasonably expect from what you have to spend. It doesn’t make sense for them to develop a $100K plan when you only have $25K to spend, but it also isn’t fair to expect $25K to buy $100K worth of results.