7 reasons why your business must have a marketing budget

marketing budgetAll businesses must market themselves in order to attract new prospects and then convert them into new clients. So why it is that less than 50% of small businesses have a marketing budget?

If you want to achieve the growth targets you have set for your business, these are the reasons why you must have a marketing budget.

1. You cannot be sure of hitting your targets without one

As I think back, it’s amazing how many companies I talk to set a target of 4 new clients a month, particularly once they clear about £1million a year, turnover-wise. How can you possibly set a target like that without working out what you need to spend?

2. If you don’t budget, marketing will fall to the bottom of the list of expenditure

When sales, or profits, fall, the first things to get cut are training expenditure and marketing spend. Both are a mistake, but let’s concentrate on marketing rather than training.

If you don’t put marketing near the top of your company expenditure, it is very easy to decide to cut your marketing budget to maintain monthly profitability. The problem is that if you cut your marketing budget, profitability will continue to fall rather than rise again. Your marketing brings in new leads that increase your profitability. Your marketing keeps your current clients spending with you, keeping up your profitability.

3. Marketing now delivers sales later on, so you cannot tie the two together.

Your CRM will provide you with a good indication of how long it takes to convert a lead into a client. You will need to add a period of time in front that the sales timeline in order to see how long it is between when your marketing budget is spent and when it starts to come back in again.

Let’s imagine that is six months. If sales are slowing down now and you start cutting the marketing budget, you will see a dramatic downturn in sales opportunities in six month’s time.

If you are seeing a drop in sales opportunities, it is likely that some of our marketing isn’t working. You do need to makes some changes to how your marketing budget is being spent. You need to identify what is, and isn’t, working and then invest more in what is working, as well as looking at other marketing channels.

4. You cannot plan an effective marketing strategy without a budget

Your marketing budget has to be set by your marketing strategy, not the other way around. The marketing budget is determined by your growth targets.

Your CRM will tell you how many leads you need to generate a sale. The average sale value will tell you how many clients you need to acquire to reach your business targets.

No. of clients x leads per new client x average lead cost = your marketing budget.

If you start cutting the marketing budget, particularly if it’s done in a swathing manner, you are simply cutting down the number of leads you are going to generate in the coming months. Of course, if your Sales Team can increase their conversion rate, you won’t need as many leads!?!

5. Your marketing team won’t know where they stand

Whether you have an internal marketing team, or you outsource your marketing, you want them to be effective. If they don’t know what they can spend from one month to the next, how can they plan what to do from one month to the next? You want your marketing budget to be spent as effectively as possible, so give them a budget to work with. If you need to, set the original budget at a lower figure and then spend more when you can, but don’t cut the budget.

6. Your marketing will be inconsistent and so lose effectiveness

Our society bombards us with messages. We receive 100’s of marketing messages a day in the form or emails, social media, advertising, networking etc. There is only so much room in our heads for messages. The new ones simply push the old ones out (have you seen the memory scenes in Disney’s Inside Out?)

If you want your brand and your stories to be remembered by your target audience, you need to maintain a consistent flow of marketing activity to ensure you aren’t erased from the back of their minds.

7. You have to shout louder than your competitors

When the economy slows down, both you and your competitors are chasing after the reduced number of new clients out there. If those potential clients are going to recognise and then engage with you so that you have a chance to sell to them, you must ensure they see your marketing messages and remember them for when they decide they need a new supplier. To do that means more marketing, not less. He who shouts loudest, lives longest!

The calculation in 4 above may be more than you are comfortable spending. If this is the case, you will have to accept lower growth levels for the business. You may be lucky and your marketing and sales are more effective that history suggests (that will be great) but you cannot rely on that happening. If you want to achieve your growth targets, you have to commit a budget and then stick to it.

I hope this helps.

Nobody buys from people they’ve never heard of, or do they?

Back in the “olden days” when you would never get fired for buying IBM, companies spent a huge amount of money generating the brand awareness and brand trust that meant they would be considered as “an IBM brand”. Today, things have changed somewhat and people will buy from brands they’ve never heard of. There is, however, a big proviso in that purchase.

There has to be a very low level of perceived risk. Let’s look at some examples to explain what I mean.

Tertiary Brands

Back in the 90’s, the supermarkets started introducing what they called tertiary brands. These were the precursors to the value ranges that most of the supermarkets went on to develop. The tertiary brands were cheap versions of either branded or own-brand products. They would be very cheap and so, even if they didn’t taste particularly nice, you, as a consumer, hadn’t lost much. In the minds of the buyers of these products, there was a perceived monetary loss, but only a small one and so many people bought these products. They, no doubt, believed that the supermarkets wouldn’t sell anything that was that bad.

The Nokia 3310

nokia 3310With the Nokia 3310 making a comeback, it reminds of the days when that phone was de rigeur. Even in the days before Facebook and Instagram, you really weren’t cool if you had a Sony Ericsson phone. However, many people (including yours truly) bought something without the Nokia badge on it and risked what our friends would say. Personally, I rarely run with the crowd and so that was my main reason for not buying a 3310.

Amazon

Amazon now enables 1000’s of brands that few have ever heard of to offer their products to the marketplace. There are very few products that you cannot find on Amazon.  In the same vein, Ebay allows us to buy from people we’ve never heard of, never mine brands.  £millions are spent every day on both new and secondhand products where we have no clue whether they are going to be any good, or even work.  Luckily for us, the peer reviews fellow purchasers provide allow us to reduce the risk in our minds before pressing “Add to Basket”.

So what do all of these have in common?

They met a need in the market at the time, either now or in the past.

Do you meet a need?

When a decision maker is considering purchasing from you for the first time, your marketing has to do the following:

  1. Show that you help them resolve a need
  2. Reduce the level of perceived risk to an acceptable level.

Reducing perceived risk

In a B2B market, price is a factor, but rarely the sole factor. The old adage still fits: “There is good, quick and cheap.  You can have any two, but not all three”.

Price is going to help, but to me the key factor is proof.  Show your target audience the evidence you have that shows you can deliver on their needs.

We’ll start looking at the different types of evidence next week..

I hope this helps