How to Budget for Marketing
‘Simple’ and ‘easy’, are not necessarily the same thing. Running a marathon, for example, is very simple – just put one foot in front of the other in succession… but it is not easy to do this for 26 plus miles!
One of the most common questions we hear from business owners and executives is ‘how much should I budget for marketing?’ This is a very simple question, but it is not an easy one to answer.
Before we deal with numbers, let’s mention some of the categories of marketing expenses – here are the major ones to consider:
- Marketing research
- Marketing planning
- Marketing management
- Marketing production (graphic design, printing, video/audio production, product development, etc.)
- Media placement (advertising of various kinds)
- Trade shows
- Promotional costs (cost of discounts, coupons, premiums, etc.)
The most instinctive common approach is to express overall marketing expenditures is as a percentage of sales (i.e. 15% of gross sales). This is a relatively easy approach and it makes a lot of sense because it inherently ties marketing to results (sales) and it provides a logical framework.
Unfortunately, this approach suffers from two major disadvantages:
1. If we are launching a new product or a new initiative, we do not know yet what ‘sales’ would be… so how could we express the budget in terms of sales?
2. More critically, this approach tends to exaggerate current conditions and therefore be counterproductive.
More specifically, if the marketing budget is set at 15% of sales and sales go up, so does the marketing expenditures during a time we might be able to lower them. In contrast, when sales go down, so will the marketing investment, when the time might be appropriate to increase marketing activities, which would help sales.
The way to deal with the shortcomings of the ‘percentage of sales’ approach is to commit to being critical and flexible. Start with a certain percentage, and track results. If sales go up, don’t automatically increase the amount of dollars spent; and if sales go down, don’t be in a hurry to cut your marketing budget. Analyze the situation, figure out what worked well and what didn’t, and make adjustments to your marketing plan and budget.
A good place to start is somewhere between 5% and 15% of sales or projected sales. Use the lower end of the range to budget for ‘routine’ marketing activities with established products and in mildly-competitive environments. Use a percentage of sales closer to the higher end of that range when introducing a new product, penetrating a new market, highly-competitive environments or similar situations.
If you need help with your marketing budget or just want a professional opinion about your budget, we will be happy to speak with you about it, without any obligation on your part.
Duke Merhavy, MBA, Ph.D.
President & Chief Marketing Officer
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10 Tips to Elevate Your Business at a Trade Show
By Polly Stroup, Editor and Copywriter at Fractional CMO & Marketing
Deciding to exhibit at a trade show is like any investment, your potential ROI must be weighed first. But, with careful planning, this calculated leap could elevate your business to a whole new level! Exhibiting at a trade show gives you a powerful platform for meeting new customers, reaching out to existing clients, and building an established and reliable brand.
Industry professionals attend trade shows because they want to be on the cutting-edge of the latest technology, tools and advancements. Now is the time to impress them with your expertise.
Here are a few tips to help build your trade show presence:
1. Set Goals: Whether it’s to generate new sales, increase name recognition and branding, or grow your email and marketing database, establishing trade show goals will set your event up for success.
2. Create Industry Branding: You’ve worked hard developing your value proposition, now give attendees a taste of what it is you do. If you’re a high-tech company, show a high-tech experience. If you’re known for service, be the best host at the show.
3. Make the Booth Eye-Catching: Make an impact using smart design elements like catchy kiosks, counters and product displays, instantly conveying what your company is all about. Showcasing new product launches and services is also a draw. The sales material is just as important. Potential customers should leave with professionally prepared information that will remind them why you’re their number one choice.
4. Utilize Face-to-Face Marketing: These days much business is done digitally. At a trade show, “FaceTime” is the real deal! Face-to-face connections, shaking hands with decision makers and professionals within your industry creates a relaxed environment and lasting professional relationships.
5. Develop a Polished Team: A well-designed and engaging trade show booth and the staff manning it speaks volumes. Team members should project a warm, professional and friendly atmosphere. Beforehand, make time for staff to rehearse the sales pitch, making sure it aligns with the overall marketing message.
6. Enhance Customer Experience: The customer experience begins before and lasts beyond the trade show. Your booth is cutting edge and staff is professional, be sure your website is equally inviting so customers can easily obtain additional information. An approachable demeanor continues after the show. It goes without saying, follow ups will take place so a friendly rapport upon the initial meeting makes future contact much easier.
7. Research Your Competition: Walk the floor to check out your competition, take note of product displays, engagement tactics and sales pitches. You’ll get a clear picture of their marketing strategy. Don’t forget to collect literature for later review with your marketing department.
8. Build Lasting Relationships: Trade shows are the ultimate networking opportunity! You never know who may need your product or services or if what you do may be complementary to what they do. Learning more about other companies and their products will help you understand where your company fits in the big picture.
9. Get Social: Don’t forget about event social media coverage! From live tweeting (using the tradeshow hashtag), to uploading pictures, utilize social media to keep the buzz going about your booth.
10. Evaluate Performance: There’s always room for improvement. A post trade show evaluation is one of the most important tools to improve and guide the future of your trade show successes.
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