You must market your business if you want 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 7 reasons why you must have a marketing budget.
1. You cannot be sure of hitting your targets without one
Assuming you want to grow your business, what is your target for the coming 12 months? How can you be confident you are going to hit your target if you aren’t setting aside a budget for your marketing? Of course, you might be lucky. You might get a number of referrals, including some big ones, and they might all close and that’s your target done for the year. You might, but you might not too.
By allocating money each month into a marketing budget, you are far more likely to hit your targets.
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 priorities, 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. We worked with a client on the marketing around a trade show a little while ago. A month after the show, they expressed unhappiness with the marketing performance. When they checked again a few months later, the show had generated over £100K in revenue!
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 in six month’s time.
If you are seeing a drop in sales opportunities, it is likely that some of your 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. If you’re still unsure, give us a call on 020 8634 5911.