CMO’s spend 9.4% to 12.1% of their total company budget on marketing.
There is no one-size-fits all answer to how much you should spend on marketing, but with some clear objectives and good reporting, you can steadily increase your ROAS (Return on Ad Spend).
The most important thing to consider before spending any marketing dollars is: What is my goal for the business – Branding, Lead Generating, or Sales?
Existing Businesses are much easier to determine a marketing budget for because we have historical data that we can look at and use to make some good decisions.
According to Entrepreneur.com, new companies spend 12-20% of their projected revenue on marketing.
One of the biggest questions that we hear in the Ag, Western, and Outdoor industry is – how much should I be spending on marketing? Unfortunately, there is no crystal-clear back and white answer. Instead the answer is much more specific to each business and what that businesses’ objectives are. Don’t worry though, there are some key objectives and metrics we can look at to get a marketing budget game plan put together for your business.
According to the www.CMOSurvey.org , CMO’s spend 9.4% to 12.1% of their total company budget on marketing.
The most important thing to consider before spending any marketing dollars is: What is my goal for the business – Branding, Lead Generating, or Sales? (Keep in mind, it is okay to have more than one marketing goal as long as the budget can support multiple goals).
Marketing Goal: Branding
When talking with business owner’s and marketing managers, this can be one of the hardest goals to justify, because to put it simply – you can’t always measure a true return on a branding investment. Some ways you can achieve your branding goals include investing in social media ads, display ads, and branded merchandises. A big plus to social media ads and display ads is that you can measure how many people saw your Ad. Even though you can’t always measure a true ROAS (Return on Ad Spend), it can be valuable to know which marketing tools are putting your brand in front of the most eyeballs. This can be especially true for wholesale brands who are responsible for driving customer’s to their retail dealer network.
Marketing Goal: Lead Generation
Lead Generation is usually the metric we use when we are discussing the sale of a service or a big-ticket item or even a wholesale order where the transaction won’t necessarily take place in a single session online. In our industry this would include things like Tractors and ATV’s, Ag-Services, and B2B Ag-products. Instead of measuring the exact amount of dollars generated off of a marketing spend, we might measure things such as how many users clicked through to your businesses’ website or how many users completed your contact us form on your website. Although a prospect visiting your website may not seem super exciting it is important to keep in mind that with digital marketing something as simple as a website visit will allow you to retarget the user and potentially send them an offer later on turning a lead into a customer. Some good marketing investments for lead generation include: search engine marketing (things like Google-Ad-Words), SEO, text marketing campaigns, and a web design that is designed with lead generation in-mind. With all three you are marketing to the prospect when they are actively searching for or researching your product – The best time to generate leads.
Marketing Goal: Sales
Sales are, well just that, sales. Companies that typically have a marketing goal of sales are usually businesses that have a business model where the entire transaction takes place online. In our industry this includes boutiques, western retailers, and non-freight sensitive Ag products (animal health products, livestock products, and parts for bigger Ag items to name a few). Sales is by far the easiest goal to track because most all businesses are setup to thoroughly track sales. And with digital marketing, and tools such as Google Analytics, it can be simple to see how many sales are generated off of each marketing dollar spent. Just like the lead generation goal, some good marketing investments include: search engine marketing, SEO, social media ads (when there is a coupon or offer involved), text message marketing, and a website that is optimized for E-Commerce.
Existing Businesses (Been in Business for More than 5 Years).
Existing Businesses are much easier to determine a marketing budget for because we have historical data that we can look at and use to make some good decisions. According to www.Entrepreneur.com established businesses allocate 6-12% of their projected revenue on marketing. Existing businesses tend to have a larger budget and have the ability to invest in all three marketing goals. It is important to remember that as your sales revenue grows your marketing dollars should grow as well. Although an established company has gained some market share it is important to keep investing in marketing to stay ahead of competitor and new businesses entering the market.
New Businesses (Been in Business for 1-5 years).
One of the hardest things to determine for a new business in the Ag, Western, and Outdoor industry is how much should I spend on marketing? According to www.Entrepreneur.com, new companies spend 12-20% of their projected revenue on marketing. (For businesses that have been in business for less than one year this is most likely too high of a marketing budget). New businesses may not have the historical data to review to determine key metrics like customer acquisition cost and conversion rate. We suggest reverse engineering your budget and instead determine – how much do I feel comfortable spending on marketing this year? As time goes on and with good reporting it won’t take long to have enough data to make more strategic marketing decisions such as – which marketing channels to dial back vs. which ones to increase your investment in.
Let’s Wrap this Up!
Most importantly make sure you are measuring your results. Until you can measure how many eyeballs you got in front of, or how many leads/sales you generated, you will always be taking shots in the dark trying to hit a moving target. There is no black and white answer to the perfect marketing budget, but with a clear marketing goal and measurable results, you can continuously tweak your marketing plan and increase your ROAS.
To learn more about available marketing products from Sterling Brands visit our complete website at www.brandcowboy.com.