So, the worst seems to be behind us in this pandemic (except for Victorian businesses, our hearts go out to you all) and we're all now wondering - is it time to start the hustle up again?
For every business, marketing is essential to profitability and growth. Yet many small businesses don’t allocate enough money to marketing — seemingly because they simply don’t have the budget or they don’t have an understanding of it.
Now that so many businesses have opened up across New South Wales, consumers are beginning to be spoiled for choice, and not in a traditional way. Our potential customers have been locked away, left to their own devices, and now that they can go out they really don’t know what they want or what they FEEL like doing, seeing, buying or eating.
It’s hard for consumers to be so overwhelmed, and when consumers are overwhelmed they typically don’t buy. So how can we make their choice selection simpler for them and get them coming through our door?
The secret is laser targeted marketing.
Communication allows businesses to demonstrate they’re open, operating well and are the perfect choice for that potential customer to come out of the depths of their iso home and experience the real world again.
More likely than not, small business owners lack experience developing and implementing a realistic marketing plan and budget.
A solid marketing budget is necessary for getting your message out to the right audience.
Here are the 5 steps that a small business should follow to develop a marketing budget:
Research your customers
Match spending to revenue
Make wise spending decisions
Correct the course as needed
Utilise best practices
Talking about overwhelming… marketing strategies can feel like an Everest for small business owners to conquer.
We’ll attempt to provide a step-by-step guide that can help a small business owner determine how much money to allocate to marketing, and how to spend it wisely.
1. Know your potential customers and their audience size
Before creating a marketing budget, a small business owner needs to know which channels to use to reach potential customers. This consideration requires a deep dive into your target audience to learn as much information as possible.
What is your target age group?
What is your target income level?
What is your target geographical area? Suburb? Big city? Rural area?
What brands does your target audience interact with regularly?
All of this information can be accessed by researching your industry online.
Once you understand your potential customers, you can figure out how to best guide them through the sales funnel.
The best way to find an audience from scratch is Facebook’s Audience Insights. This is such a powerful tool in finding what other brands, interests and hobbies your target audience interacts with.
For example if you sell coffee grounds, you’d type ‘coffee’ as an interest into FB Audience Insights and FB will show you an array of interests that people who like ‘coffee’ also like! It’s almost too easy.
Now that you have your target audience, it’s important to understand the deep dive you need to take into your sales funnel, where you’ll track results throughout the revenue cycle, from prospect to customer.
Here is the sales funnel data you will need to review to get a good grasp on your marketing needs:
Number of site visits per month
Number of leads generated per month
Number of leads converted to sales qualified leads (SQLs)
Cost to generate SQLs
Number of leads converted into opportunities
Number of opportunities that close as new deals
Average value/revenue for a new deal
Harvesting this data from digital sources, such as a marketing automation platform or customer relationship management (CRM) software, can make this process relatively simple.
If you run Facebook Ads this also is a fantastic way to track audience behaviour and your sales funnel but of course requires a little extra budget.
2. Calculate spend budget off revenue
Many businesses allocate a percentage of actual or projected gross revenues to marketing, usually between 3–5% for small businesses. But the correct allocation actually depends on several factors, including your industry sector, your business capacity, the amount of growth you can reasonably handle, and how quickly you need to make an impact.
For example, during the early brand-building years, retail businesses may look to spend up to 20% of sales on marketing in order to establish themselves in the marketplace.
Budget is usually split between the below costs:
Brand development costs, including all the channels you use to promote your brand:
Costs of promoting your business:
If your business’ margins are lower than 10–12%, you should consider lowering your overall margins and allocating additional spending to marketing. While this is a tough call for some business owners to make, you should not base your marketing budget on what’s “left over” once all your other business expenses are covered.
3. Tailor you budget appropriately
Knowing how much you have to spend on marketing is critical, but even more crucial is knowing exactly how to spend your marketing dollars. You need to have a plan.
Your small business marketing budget should be a component of your overall business plan, outlining the costs of how you are going to achieve your marketing goals within a certain timeframe.
Some marketing resources are available with no cost (e.g., “free” low volume email marketing through a platform like MailChimp), but even free services eventually will need to be upgraded to a higher functioning platform, and that will come with a cost.
Small businesses may also look to advertise through digital platforms, such as Facebook and Google AdWords. In most cases, these platforms can be tailored for small businesses by adjusting your budget for each campaign.
For example, you can use Google Adwords’ Keyword Planner to research the keywords your customers are using to search for you. The tool allows you to target by language, search engine, and location. You can then use these keyword ideas to try a Google Adwords campaign for increasing website traffic.
The great thing about social media ads is that you can experiment with them without spending too much money. Start small by promoting a tweet or boosting a Facebook or LinkedIn post to increase your reach without breaking your budget.
Finally, most small business owners need to decide whether to outsource marketing activities, depending on the amount of staff and time you have available.
When considering whether or not to outsource, small businesses must decide what they have more of — the time and expertise to handle tasks in-house, or the money to hire someone else? Many small businesses strive to find a balance between the two.
4. Test, test, test, test, test, test, test…….
Once you develop a marketing plan and budget, remember that it doesn’t have to be fixed. There may be times when you need to change things, such as running another campaign or event to capitalize on great timing.
Knowing whether your spending is actually helping you achieve your marketing goals is more important than sticking rigidly to a budget. After all, no marketing budget is carved in stone. A small business can test new areas and outlets, like social media advertising, and examine the results. You can, then, pivot based on the outcomes.
For example, businesses spent less than 10% of their marketing budgets on social media in 2017, but plan to spend nearly 20% by 2023.
The key is to constantly monitor your marketing efforts. If the platform is generating the ROI you need, then you can continue to invest that amount, or even increase it if you are able. If the platform is providing lacklustre results, you can decrease or eliminate that cost and reinvest in what platforms are working.
However, some areas of your marketing plan, like content marketing, will not show a direct ROI because they focus more on branding than sales.
Have a plan in place for measuring your spending and the impact that activities have on your bottom line. Compare tactics and analyse the effects. Was one quarter more profitable than another? You will need to understand why in order to replicate that effect on your bottom line.
Above all, have the patience needed to follow through on your marketing efforts across the organisation. Don’t give up too quickly, because it takes time and effort to build and grow a brand.
How often you revisit and maintain your marketing plans depends upon your willingness to focus on the short-term or long-term future. For instance, if you only review the plan on an annual basis, you may miss out on market landscape changes or seasonal business adjustments. However, looking at the marketing spend on a monthly or quarterly basis will not allow you to see bigger picture items, like industry trends or medium and long-term strategy.
A small business owner should trust his or her instincts. If you feel like something in your marketing plan is not working, you should move that spending into another area. There is no rule that says you have to stick to your marketing plan or budget for the entire year if the activities are not helping you achieve your business goals.
5. Follow what works for others
You should thoroughly research and understand current and future marketing trends to better navigate the marketing budgeting process.
When setting a marketing budget, it is important to adopt different technologies and platforms to keep up with the pace of your industry sector. For example, if you use email marketing, take advantage of trending features such as contact insights, email tracking, and automated email scheduling.
Many times, small businesses will react to the “next big thing” used by their competition without validation and research. Instead of blindly reacting to competitors’ tactics, you should research if their new tactic will successfully reach your unique target market.
For example, your competitor may decide to advertise during the NRL finals — a traditionally expensive endeavour, even on the local level, as the following chart shows.
Still, just because the competition decides to spend all that money doesn’t mean that you should look to book time during next year’s “big game.”
Rather, look at the sales trends that took place after that advertisement aired. Did you see a decrease in business? Did you notice more people visiting your competitor? Decide first if the competition’s strategy made an impact before following suit.
Your marketing budget needs to include traditional approaches as well as emerging platforms and tactics.
If you are not sure exactly what to try when creating a small business marketing budget, then help is at hand.
It can be extremely overwhelming to start a marketing journey with fear of the unknown and losing money. That’s why at Evie Studios, we’re currently providing FREE strategy calls to small businesses who need marketing strategy advice.
There is no “cookie cutter” formula for developing or spending your marketing budget, and that’s why having a marketing expert look over your goals and current branding to formulate a solution can be your most valuable asset.
In this free call, we will work with you to develop a marketing strategy that adheres to your target audience, objectives and goals to kick start a landslide of growth through the digital and social media landscape. Info provided by The Manifest’s article.
(02) 8006 4212