For many businesses, it can be tempting to think of marketing as an operational cost, just part of the cost of doing business.
In reality, marketing is an investment in your business – money you put back in to the business to help it strengthen and grow.
Businesses often struggle with the best way to determine their annual marketing budgets. There’s no simple formula, but there are guidelines that smart business people can follow to help ensure they budget wisely and appropriately for their marketing needs.
Basics for Sound Investing
It is common for businesses to base their marketing budget on the previous years’ sales numbers and then increase or decrease their marketing budget accordingly. Be careful…there’s a real danger in that. The danger lay in a company spending what they want to spend on marketing, rather than what they should spend on marketing, and that gap can be the difference between status quo and growth.
The marketing investment must reflect three basics:
- Reliance on solid data
- Sound marketing strategies
- Clearly defined goals.
Staying on Point
Businesses should review their marketing plan no less than once a year to ensure they stay on target. A comprehensive review requires asking some questions:
- Have your target markets changed?
- How has the competitive field changed?
- Should we develop new marketing goals?
- What are the strategies we need to implement to achieve these goals?
What was effective 10 years ago, 5 years ago and or even last year may not be what positions us for success today and into the future. Once you’ve answered these critical questions, then proceed to determining what current goals will cost, and whether your business can afford it.
Measuring Success
One advantage of thinking of marketing as an investment rather than a cost is that we understand investment often brings reward. Once you’ve made your decisions about how much you can invest and how to invest, then it’s time to measure that investment for return. Every postcard marketing campaign, sales promotion, and sales strategy should be generating revenue for your business. For example, if postcard marketing has a new customer acquisition rate of around 4%…are you finding your postcard marketing campaigns more or less successful? If you fail to evaluate the return on your investment, how will you know if what you’re doing is truly effective?
There are rarely simply answers to nearly any question in business, but the answers are easier to find if you begin with asking the right questions. Sometimes you have to change how you’re thinking about the costs related to business and realize that what you put into it is what you get back out of it, and that’s not as easy as a simple number on a balance sheet.