How do you keep control of marketing spend in a growing business? How much should your business be spending on marketing? Is it an investment in the future or just a cost?
Marketing spend is a difficult sell to accountants – there is no way of guaranteeing that it will deliver sufficient sales to cover the cost nevermind grow the business in the long run. It’s easy to argue this is frivolous spending, especially if times are tight.
But without marketing/ branding/ advertising activity there is a serious chance that sales won’t be maintained at a profitable level (or grow to get there) jeopardising the work that everyone else is doing. So yes, marketing is a necessary business investment.
So in the real world how much budget do you allocate to marketing; 2%? 5%? 10%?! and what’s the best way to spend it?
First, I would hark back to earlier posts about creating a cost conscious culture: everyone in the business can have an impact so good communication is vital. Take time to explain the goals to the team and show how they can play their part.
When the main budget is being constructed it’s not uncommon for marketing to be “given” a set amount of budget each month, regardless of future plans. This reflects the fact that ongoing marketing is essential, but wouldn’t it be better to look at the marketing plan and work out a cost of that?
Working in isolation risks creating plans that promise great things, both in terms of the budgeted profit and new prospects, but then fails to deliver. Setting out on to achieve goals when you know you can’t afford the resources that are needed is going to result in missed targets and it is easy to see this as a bad plan rather than a missed opportunity.
So how do you budget for a successful marketing effort?
Obviously it depends on what you want to achieve; doubling sales is likely to be much more demanding that maintaining current sales. But also it depends on the customers you’re trying to reach and the platforms you’re planning to use, so really there is no right answer!
So back to collaboration between the teams at the planning stage:
Focus on quality rather than quantity. That’s about reaching the right customers, and looking at specific activity rather than straight sales increases. Working on multiple fronts at the same time can be costly (and exhausting!) and there will be specific timescales for different offerings (advertising Christmas party bookings in January?).
The other key factor is that success depends on what you measure. It is important to understand what good results for your business will look like, so identify a return on investment at the outset. That doesn’t have to be in money terms (sales gained vs cash spent), why not look at other measures (views, enquiries, recognition, footfall) instead? Once you’ve identified your measure, you need to collect data to measure it – to review and work out if the expected results are being delivered.
As I’ve said before a budget should be a living document; constantly under review. When you’ve got some data, you can check the results against what you expected, and if necessary change the plan.
At this point you can update your forecast with better information to make see the implications of the changes to both profit and cashflow. This allows you to understand what you’re spending, remember why, and keep control of marketing spend in your business.