Are you getting good results from your small business marketing? If your results are falling short of your expectations, perhaps it’s because you’re not investing enough money in your marketing campaigns. How much money should a small business spend on marketing annually, and how can you make the most of your precious marketing budget? Here’s what you need to know.
How much should a small business spend on marketing?
If you think of marketing spending as eating into your profits, you’re thinking the wrong way. Marketing isn’t an expense—it’s an investment, one that drives your sales. Without marketing you won’t reach new potential customers, and that could mean lower sales.
There’s no hard and fast answer to how much your marketing budget should be. Many businesses use a percentage of revenues as a guide (if you’re a startup, use your projected revenues). But there’s a wide range when it comes to what percentage to spend.
Small Business Trends reports that the average business spends 1.08 percent of its revenues on advertising, with variations from industry to industry. For instance, retailers spend more (about four percent) while restaurants spend 1.93 percent.
Web Strategies reports average marketing spending in 2018 was 7.9 percent of revenues, with B2B product companies spending 6.3 percent, B2B services companies spending 6.9 percent.
B2C companies spent slightly more on average, with product companies spending 9.6 percent and B2C services companies spending 11.8 percent.
In general, B2C companies need to budget more for marketing than B2B companies. You’ll also need to budget more for marketing when your business is just starting out. You’re still trying to build awareness of your brand and attract customers. Once your business is established, you can reduce your marketing budget because you will have a steady customer base. However, that doesn’t mean you can stop marketing. You’ll still need to invest in attracting new customers and retaining existing ones.
Because marketing budgets can vary so widely, it’s a good idea to contact your industry trade association or read industry trade publications. See if they offer any benchmarks for setting a budget.
Keep in mind that marketing can easily lead to a chicken-and-egg situation — your sales are dropping, so you cut your marketing budget, leading your sales to decline even further. If you see sales slowing, it might be the right time to increase your marketing — particularly if it’s a slow economy and other businesses are cutting back on their marketing.
How can I maximize my marketing budget?
Once you’ve set your marketing budget, plan the most effective way to use it. If you’ve been in business a while, focus your marketing efforts on the ones that have gotten the best results in the past. This enables you to fine-tune your marketing and phase out ineffective campaigns.
Including a mix of marketing methods also helps maximize results. Don’t put all your eggs in one marketing basket! Good marketing plans build brand awareness by promoting the business in all the arenas where you find your target customer.
Some marketing methods are costlier than others. Tactics such as word-of-mouth, social media marketing and volunteering at community events are all virtually free ways to get your business in front of the public. If your marketing budget is tight, ramping up the low-cost or free methods and being very selective about the more expensive methods you use can help you make the most of it.
Monitor your results
Tracking the results of your marketing is key to getting the best return on investment. Tracking can be as simple as reminding your employees to ask new customers where they learned about your business. If you’re doing print, direct mail, TV or radio advertising, you can use different codes for each ad. Track which ones attract the most customers.
There are also a wide range of tech tools available to help you monitor the effectiveness of your marketing. For example, email marketing apps, social media apps and online advertising all offer analytics tools. You can use these to see which of your marketing messages are getting the best results.
By taking advantage of all the tools available to you, monitoring your results and learning to see marketing as an investment, not an expense, you’ll get better results from your marketing budget.