How Much Should You Be Spending On Marketing?
Advertising and marketing is clearly a huge part of running a successful online business and it’s not just essential when starting up a business; in fact it is even more important that you continue targeting engaging messages out to your audience as your business grows.
Your online business needs to stay relevant and interesting to your customers as their worlds evolve. It’s also important to refresh your formal market research regularly, to make sure that you have all the data you need and are genuinely satisfying your customers most current needs.
Question: So how much should you spend on marketing for an online business?
Answer: On average, 7 to 8% of your sales should be spent on marketing if you are making a profit of less than £5m a year.
This could potentially be up to 12% for your sales for rapid growth businesses or businesses that make more than £5m profit a year or require significant, step change, type marketing campaigns.
Marketing budgets are increasing.
Most online businesses have reported an increase in marketing budget. According to the GetResponse survey, 59% of businesses state that this year they will increase spending on social media sites such as Facebook and LinkedIn. Online marketing can be implemented quickly and with the right know-how and techniques, you are able to compete against bigger businesses online.
How to allocate your marketing budget.
No matter how large or small your business is, we all have limited funds and so we have to ensure that every $1 we spend on marketing generates sales for us or at least some form of suitable exchange in value. It's got to be worth doing.
The tricky part is how to make sure we spread our limited funds across the right sort of projects and online channels that will get us more eyeballs and more sales.
Question: How do you allocate your marketing budget as an online business?
Answer: You need to consider having a much heavier proportion to online marketing versus physical store or real-world presence. You need to be where your audience is - online!
So your marketing budget will most likely be allocated across key areas such as:
- PayPerClick (PPC)
- Social Media Posts and Ads
- Partnering with Influencers
- Link Building Strategy
- Affiliate programmes
- Creating unique inbound content such as blog posts, videos, product flat-lay images, ebooks, infographics.
- ...Competitions, and much more.
Our Top Tips
- Budget Specifically For Video: Video content is on the rise as audiences love consuming video content. They are connecting and engaging with this format much more than ever before, however, whilst using your iphone to create videos is a great start for most, a professional video shoot can cost more to create so you need to allocate a bigger budget for this.
- Budget Specifically for Social: Don’t forget to allocate money for social media and mobile marketing too. Digital advertising is increasing, as overall, it costs less than traditional forms. There are a lot of areas to consider, so it is worth creating a grid and writing down all the different elements. Decide what your audience likes and engages with the most, review your social insights data to get some facts to back this up and see what has worked well previously (don't just go on a hunch!), and then allocate the money according to that.
Why email marketing is still brilliant.
Despite some people thinking that email marketing is redundant these days due to the rise in social media use and that emails can be a little dull, the data tells us differently. Email marketing is still brilliant and worth investing in as a dedicated part of your marketing budget.
Optinmonster.com explains how 99% of us still check our emails everyday and that ¾ of under 20's still use email. Due to the nature of social media and the constantly changing algorithms, it’s more likely that your email will get a much higher reach than a post on Facebook would, even if not all of them are opened.
Think about it - Email is probably the one digital space on earth where you can have a direct, private and uninterrupted moment with your customer, without an advert popping up or a distracting "like" notification ping taking them off down the social media rabbit hole.
It is pure and it works. In fact, due to new technology and design tools such as the ones available on sites such as Converkit and MailChimp, we can create amazing, engaging emails.
Since GDPR changed how we store customer’s details and use them, businesses have found that those that have chosen to subscribe are more likely to engage and be excited about the emails they receive. This leads to more engagement and more successful leads being made.
It’s clear that email is still just as important today as it was. Especially as we are now seeing people actually turning away from social media and not logging into their accounts for weeks, or months. Email will always be a consistent tool that we use in our everyday life and is an audience that won’t just disappear - so set aside a dedicated budget for it!
Consider your audience.
You need to get a clear idea on which social media channels your customers are actually using. Only then invest your budget in those platforms. For example, if your audience is teenage girls, we promise you they are not on Facebook (quote from our teenage Apprentice at NTN Towers " err..Facebook is what my Mum uses!) ... but this young audience are most definitely using Instagram and Snapchat.
You need to know exactly where your audience is hanging out in terms of social media and target them on there. This is when market research is really important.
It’s worth doing market research every so often just to make sure that you are satisfying your customer and reaching them in the right way.
There is simply no point spending all of your marketing budget on the wrong social platform or worse spreading your self and your budget far too thin by trying to be on them all! Far better to stick to one platform and be amazing on that platform, understand it, build an audience who loves you and go from there.
Make It Happen In Your Business
Marketing is a huge part of running a business and decisions on setting a marketing budget shouldn’t be made lightly or avoided!
If you want to get traction in your business growth, you will need to invest in marketing. There is no way around this. So review your marketing priorities, decide on where and how to reach your audience and set your budget for this year
- Do your research, get to know your customer and make a list of all the platforms and online spaces where your audience hangs out. These will be your targets.
- Budget wisely and spread the costs over the different platforms, from traditional, email to social media.
- Then regularly check the results and how well the marketing went. You must always be able to determine your return on investment (ROI) - ie. how many sales you got in return for your spend on marketing.
- If you can't clearly determine what your ROI would be on a marketing opportunity, then don't spend the money on it. Unless you are a mega brand like McDonalds very few of us can afford random "brand awareness" campaigns that aren't clearly attached to generating sales! Always forecast what your expected return should be and plan ahead before you spend.
- Once the marketing campaign has completed, note down what went well and what you could change next time. Look at the results and review how many sales resulted from your efforts. Adjust, learn, rinse, repeat.
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