Determining a Marketing Budget
Investing in your business is no small matter. Choosing your marketing investments are some of the keys to real marketing success. It is very understandable why business owners are very confused about marketing and which investments they should risk to make. There are so many platforms, venues and experts telling you do this… no now do this, but wait don’t forget about this — mass confusion! So how do you identify what marketing investments you should make and how much you should spend?
The first place to start is to consider your objectives. What is the goal of the marketing effort? Marketing Intentionally is based first and foremost on “intention”, i.e. what is your intended goal? It’s important to identify in detail what that goal (intention) looks like. So if you are looking to attract new customers, how many customers are you intending to attract? What products or services are you looking to offer? Make it real, make it count. So, if you have a product or service that costs $250, and you are looking to increase your monthly net income, you need to know the real numbers to make real measurements on effectiveness. The more detailed you can be on this step, the more information it will provide in the track and measure step of your marketing. Remember, if you can’t track and measure then it may not be a “best practice marketing” method.
The next step, once you have clearly identified the goal of the marketing effort, is to determine which marketing venues you can use that are efficient and most likely to produce the intended results. So for example, if you decide to use Facebook marketing as a venue, you can set up a specific campaign, direct it to market to a particular target audience, and you can set a very specific budget which you can monitor. This type of advertising is sold as pay per click (PPC) or pay per impression (PPI). The great thing is you can track and measure the effectiveness of these ads. You cannot do that with print ads (so easily). The question remains “How do you set that budget?”
The easiest way for me to explain setting up a marketing budget is to provide a simple example. If your intention is to acquire 5 new customers @ $250 each, the result of the first time purchase has the potential to reach is $1250. Some might say use the 80/20 rule (i.e. 1250/20 = $250). However, my next question is what is the “annual value” of the average customer? In general, knowing the annual value of your customer is at the heart of your marketing budget. It generally will cost more money to attract a new client than it will to retain, re-sell, up-sell and cross sell an existing customer. The key is to make a relationship with your customers.
Marketing is a very intentional process. You are marketing for some result, know what that looks like in real time. Understand the annual value of your customer. Its an average dollar amount that a customer is most likely to spend in one year for your goods and services. I have colleagues that actually do this formula for lifetime value. I think this is harder for most business owners to calculate. That is why I use annual value, as things change (i.e. services, products, competition, etc.). Going back to our example, while it may appear that investing $50 in marketing to attract a client who will make an initial purchase of $250, if the annual value of that customer is $2000, then the marketing budget changes dramatically. The golden nugget is realizing that having a real system in place to build those on-going relationships will provide ability to create more sales. Relationship marketing is also at the heart of your marketing budget. Stop fractionalized marketing and always remember, market intentionally!
Blessings to your growth
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