Money, Marketing, and Business Magic.
JOHN GOWER is a writer for NerdWallet, a personal finance website dedicated to helping small businesses save money with financial tips on everything from social media marketing to info on bank CD rates. Today he get's both nerdy and edgy to talk about the bucks you spend on growing your business.
Coming up with an effective marketing strategy can be one of the hardest tasks for a small business. Yet, while it can be a bit scary to invest money directly into a marketing strategy, this move is absolutely necessary.
How much should you invest?
What are some tips on how to hit the ground running? Which forms of marketing are the most effective? The answers aren’t going to be the same for every single business, but there are certainly some guidelines everyone can follow. Here, the best overall answers to the questions will be revealed so that your small business can get an idea of where to go.
Coming up with a finite dollar amount to spend on marketing is one of the most difficult numbers to come up with.
The Small Business Administration (SBA) recommends that small businesses (those that generate under $5 million in total annual revenue) should be spending between seven and eight percent of their total budget towards marketing.
Of course, the number you choose really depends on the type of company that you are running. You should always be prepared to spend a bit more if you are in the consumer game. The SBA recommends that consumer-based industries spend up to 20 percent of their budget for marketing. That might seem very high to some, when you consider that a $5 million a year company could be spending over $80,000 for a single marketing campaign for its business. But it is definitely a baseline to take into account. Food manufacturers, for example, are spending upwards of 35 percent of their budget on marketing. Competitive industries that depend on regular consumer shopping in retail almost always have similar figures.
There's a standard way to do this.
Of course, following those recommendations from a government agency is only one way to go. Many will see those numbers and quickly decide to drop 20 percent of their budget towards marketing without really considering other avenues.
Here is the typical rule of thumb that is still used today by many businesses:
- Total Revenue x 5% = Marketing budget required to maintain current awareness and visibility
- Total Revenue x 10% = Marketing budget required to grow and gain market share
Some have found success this way. They take the advertising budget, for example, and split it up evenly between newspapers, radios, billboards, etc. That strategy has worked for numerous companies, but that type of thinking hasn’t helped to launch any newer (or notable) ones into the stratosphere of success.
But times have changed.
While it’s important to continue to invest money into the older techniques, you can still cut your budget spending by going the more non-traditional route. Unlike television and newspaper, businesses know that their customers are using the Internet more than ever. Whether it is to get work done, engage in social media, or keep up with news, the net is the most popular medium around – and marketing costs are cheap.
What many companies don’t realize is that you can get your name out there without having to even spend a dime. All it takes is someone in the company to be in touch with the trends and use social media to engage potential customers. Twitter is one of the most popular sites and can be used to garner future customers for little to no cost.
How? On Twitter, there will be topics that are “trending,” with the hashtag (#) symbol. By hopping in on these trends, people are sure to become exposed to your tweets. One follower could turn into five or ten, and eventually a couple of hundred. If your product, snazzy website, commercial, or other medium goes viral, hundreds of thousands of people might suddenly enter into your pool of potential customers.
Facebook is another great way to promote your product. Along with having your own page, you can pay to promote your ads on both Twitter and Facebook. However many companies choose to simply blast their latest news without spending a dime through any of the extended offers available through either site.
Caring is a great way to market yourself.
Engaging with your customers is of the utmost importance. One of the most successful companies on the Internet right now is Taco Bell. They communicate with potential customers by coming up with clever, quick, and witty responses. When people see that, they are more inclined to go to the website (and ultimately a branch location).
When starting out, consider your marketing budget, and based on this, how your marketing strategy might fall within the tried-and-tested methods of marketing along with innovative ideas that sets your business apart from the rest. By determining exactly how much money your company is generating and how large your target audience is, the costs to market that population will become clearer over time, and you just might be the next marketing success!