What Should I Spend on Marketing?
Have you ever asked: “What should our marketing budget be?” If you Google it, you might get a simple answer. But the reality is far more scientific. If you want to know the truth, you’d better read on.
Googling this question will give you some variation of 2% or 5% of business turnover. For many years I worked in companies where I was given a percentage slice of the turnover and told to get as much out of it as possible. I never questioned this and felt lucky to have some money to play with.
But then in 2019 I was at a lecture on marketing. I was thrilled, as only senior marketing people were invited, and it was an exclusive lecture by one of the most respected marketing professors actively working today. He’s actually kind of my idol.
I learnt a great deal during this lecture, but one of the things that stuck with me was how angry he got about finance people telling marketing people what their budgets should be. And he was right! How can a financial calculation made up out of thin air effectively tell you how much you should be spending on your marketing?
What you need to do instead is let the marketing speak for itself. Decide what you want to achieve and then work backwards to decide how you’re going to achieve it.
Here is my step by step guide.
Step 1 – Your Goals
What is it you want to achieve? If you don’t know this, you shouldn’t be doing marketing anyway. Every action you take in marketing should be about helping you to achieve your goals. Otherwise all you’re doing is sort of promoting a business without any real strategy or motivation. It just becomes stuff, and that is hard for your audience to understand or buy into.
So set yourself some goals. Decide what you want to achieve. And then work backwards.
Let’s say, for example, you need 25 new customers this year. Your conversion rate is roughly one in four, so you’ll need 100 leads to give you a good chance of getting 25 new customers. Now you know your goal, you’ve got clarity and vision.
Step 2 – Think in Numbers
Firstly, straight away think in numbers. If these 25 new customers are worth £100 to you each, then you don’t want to be spending a lot of money on getting in 100 leads. What do you think is a fair amount of money to spend to get these 100 leads in depending on the total amount you’ll probably end up making from them? You must be wise in your approach. Get a rough figure in mind.
You could also think long term and say that you’ll spend a bit more in year one and two as you establish your brand, but then in years three or four you’ll cut that back. There is no right or wrong answer as long as you’re sensible with this approach.
Step 3 – Strategic Thinking
When you’ve got a rough figure in mind, now be strategic. You need to focus on how you’re going to get those leads. There has to be a strategy, not just a list of tactics. Who are you targeting, what are you saying to them, what is the hook, why are they going to be interested, what is the customer journey and how are you going to get them through your sales funnel? You need to ask and answer these important questions.
Just posting on social media isn’t enough. It has to be targeted, engaging, consistent with other areas of your marketing, and actually have an end purpose. Why are you telling people this and what do you want them to do with it? Get some notes down and make sure you understand your market and your customers.
Step 4 – Tactics
When you’ve worked out your strategy, then you list the tactics. Work through the customer journey. Where are your customers, how do they spend their day and where could you pop up in their natural environment to engage with them?
Work it out like this:
- Who are my customers?
- Where are they?
- What tactics do I need to use to reach them?
- How often should I use those tactics so I get noticed without hounding them?
- What is the journey from when they first learn about the company to successfully being a customer, and how can I maximise the conversion potential at every stage?
From this list, you’ll know exactly what you need to do. Now you need to put money against it. What can you do for free and what needs some budget?
Don’t pay for just anything. Don’t think “I must do social media because everyone does social media.” If you do social media marketing, it has to be a part of your bespoke plan because it will help you reach your goals.
Put emphasis on the tactics that are likely to offer the biggest returns. Put money into a few select areas and maximise these as much as possible.
For example, buy some data. Invest in some data (which is GDPR compliant, of course) and then use that as much as possible. Email them, call them, message them on LinkedIn. Don’t hound people, but don’t just let that data sit there either. Say to yourself, I’m going to spend £500 on data and then do a string of activities that won’t cost a lot using that data.
It’s far more cost effective to phone up your target audience and have a carefully thought through conversation, than it is to create a mass load of videos for the sake of it because you think it will get you noticed.
Having marketing budget is great. But if you don’t use it wisely, it’s a waste of money. It’s far more important to be very strategic and selective and make the brave decisions not to things, than it is to do a lot of stuff and throw money at everything in the hope that you’ll find success somewhere.