It’s a dirty little secret of small business. If you run a small company, you know what I’m talking about: You don’t really have a marketing budget.
It’s OK. You don’t have to admit it to anybody but yourself. Very few small businesses have a formal, consistent marketing line item on their budget. If they do, they fail to base that number on a solid rationale, considering what’s normal in their industry, how much their competitors spend, and other relevant factors. Most take a much more haphazard approach to marketing budgeting.
The truth is, nobody really knows what to spend on marketing because every industry is different, every company unique, and competitive dynamics are constantly shifting. Not everyone agrees what even constitutes a marketing budget: Is it limited to advertising? Should it include sales promotion, too? PR? For that matter, should it include the sales team’s salaries and overhead? The website? Social media? E-commerce? Apps?
There’s no single answer. Marketing budgets can cover a variety of different functions, and can vary widely based on a host of factors. The truth is, nobody—not even the most sophisticated marketers in the biggest corporations in the world—can say in an absolute, objective sense how much their marketing budget should be. The best they can do is evaluate their spending relative to revenue, competitors, historical results, economic conditions, and imperfect measures of return on investment, and go from there.
So rather than worrying about what you’re not doing, my advice is to accept where you are and work from there. Focus on improving the efficiency and effectiveness of your marketing budget, however you determine or define it.
To be efficient, you have to effectively define the audience you want to reach. You want to speak to as broad a market as you need but as narrow a market as you can. That can start with simple demographic characteristics like age, sex, and income. Then you can target prospects based on more subtle traits: their shopping habits, their attitudes about your brand and its competitors, their perceptions of themselves and others, their unique lifestyles, and their wants and needs. The better you get to know whose bell your brand is ringing (and why), the more efficiently you can target your efforts toward people like them.
Once you’ve identified the people you want to reach, you need to consider how effective your messages are. Is your marketing focused and compelling? Does it differentiate your brand, build trust, and generate affection? As with targeting, your messages must evolve over time, but the more intentional you are (and the better you track outcomes), the more you will learn about how the look, feel, and tone of your brand affect results.
There is, of course, much more to it than that. There are hundreds of variables to consider, and “marketing science” will always be somewhat of an oxymoron. But as you evaluate the effectiveness of your spending, you can turn the dials on targeting and messaging and increase your spending to generate greater returns or trim it back to improve your margins. Over time, a budget that may have begun as a wild guess will start to become increasingly rational.
So free your mind. Every company, every industry, and every situation is unique. There’s no one right way to determine or define a marketing budget, and being internally consistent is all that really matters. Instead of wringing your hands about how much you should be spending, focus your energies on spending it more wisely.
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Photo courtesy of: Getty Images
Originally published on: Business Week
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