How much business should invest in marketing

[nerochat]

Hi,

I know there are a lot of articles saying you should invest X or Y%.
I want to ask you, from your experience is it worth to invest more then 10% in marketing and how to determine
the initial marketing investment.

Thanks
Alex

[BritniHerman]

Marketing is a big deal for MOSTLY ALL companies. So before you just decide on a random amount you should save for your marketing strategy, you really should do some research on what everything's going to cost. Also you have to test your marketing strategies to see what works and what doesn't. You don't want to invest a lump sum into something that isn't beneficial in the least bit to your company. For example when you're using Google Adwords you have to pay per click. Some keywords can be $.05 ad some could be $25 for 1 click, so basically you have to do a lot of testing to see what works so you can have a justified budget.

[billbenson]

Marketing is a big deal for MOSTLY ALL companies. So before you just decide on a random amount you should save for your marketing strategy, you really should do some research on what everything's going to cost. Also you have to test your marketing strategies to see what works and what doesn't. You don't want to invest a lump sum into something that isn't beneficial in the least bit to your company. For example when you're using Google Adwords you have to pay per click. Some keywords can be $.05 ad some could be $25 for 1 click, so basically you have to do a lot of testing to see what works so you can have a justified budget.

I completely agree.I sell or get leads strictly from my website. I would much rather have an ugly website that places well on Google than the inverse. Ideally you have both because ultimately the site has to sell the product. But marketing is by far the most important. Things like Adwords if done properly are great for testing keywords and landing pages as well. You just keep tweaking it over time. That means the cost is going to change month by month. If you are doing some testing, it may be an expensive month. If you have a month where you have put a strategy in place, your marketing cost may be lower.

[Harold Mansfield]

I completely agree.I sell or get leads strictly from my website. I would much rather have an ugly website that places well on Google than the inverse.
Why do people always say that as if it has to be one or the other? Like there was a decision made in the board room to intentionally have an ugly website and put all efforts on SEO.

SEO is only part of your marketing, not all of it. A poorly placed ( well designed) website can make money all day long through ads, referrals, lists, social media, and other marketing avenues. 99 times out of 100 an ugly one cannot do the same.


I say set your min budget based on what you can afford and how important it is to you. Whether or not your money is wasted or helps your business in any way is directly related to how well you understand where you are spending it and why. To me there is no max budget if you are sure you're spending the money wisely. But if you aren't, I'd keep the tap flowing slowly until you have a grasp on some kind of plan.

[Freelancier]

Starting with the money is exactly backwards.

Instead, start with this question: "What do I need to do to get my best potential customers interested enough in my product/service so that the sales cycle is simple and quick?" Figure out the right answers (and there's almost always more than one), and you will know how to define your budget.

However, if you don't have the right answer(s) to that question, you better have a LOT of money, because much of it will be wasted anyway.

Marketing tactics are everywhere and everyone has an opinion about which ones worked for them. But you need to decide your marketing strategy and then align all your marketing tactics to support that strategy. And those tactics can include everything from how/when you answer the phone to the colors on your web site (if having a site supports your strategy), to getting a good D&B record (if having that supports your strategy), to accepting certain credit cards, to advertising, to your business processes when you deal with the customer. It's all related and every time you "touch" a customer, your tactic with that "touch" had better support your strategy.

Some tactics cost more than others; some just require a little effort and a shared company-wide vision. But all must support the strategy and the strategy must be the right one for your business. So start with figuring out the answer(s) to the question, formulate an overall strategy, then figure out what tactics will support the strategy and then set your budget to accomplish your marketing goals.

[billbenson]

Why do people always say that as if it has to be one or the other? Like there was a decision made in the board room to intentionally have an ugly website and put all efforts on SEO.

SEO is only part of your marketing, not all of it. A poorly placed ( well designed) website can make money all day long through ads, referrals, lists, social media, and other marketing avenues. 99 times out of 100 an ugly one cannot do the same.


I say set your min budget based on what you can afford and how important it is to you. Whether or not your money is wasted or helps your business in any way is directly related to how well you understand where you are spending it and why. To me there is no max budget if you are sure you're spending the money wisely. But if you aren't, I'd keep the tap flowing slowly until you have a grasp on some kind of plan.

I say that because I wrote an ugly (or maybe disfunctional is a better word) oscommerce site that ended up 1,2, or 3 in the serps and made me money. My unintentional web strategy was to get people so frustrated that the would call me. At first I didn't have a phone number on the site because I wanted to do hands off sales. It was a combination of putting the phone number on the site and a good AdWords campaign that made the site profitable.

I'm not saying you shouldn't have a good professional site. I've since had my site rewritten by a professional and it probably doubled my online orders. I consider the quality of the website important, but marketing is more important.

What annoys me is when web designers tell people they 'have' to have a site professionally designed. I firmly believe you can use a Joomla, WordPress, or Zencart sort of site starting out and concentrating your efforts on learning the marketing side.

I would never recommend a site builder site however. But that is because its to limiting on the marketing side and on the ultimate design side. Not to mention you don't have control of your ultimate db if you want to change to a regular site or CMS.

[Harold Mansfield]

What annoys me is when web designers tell people they 'have' to have a site professionally designed.

Well, the real truth there is that very few people have any skills or understanding of how to organize and make something look decent online. It's true that anyone who wants to can learn to use WordPress, but most people have absolutely no idea what they're doing beyond putting some words in the square.

So when I tell someone that they need a professional it's usually because I'm looking at what they've done on their own, or have assessed how little they know and know that it will be years before they stop costing themselves money.

Your "strategy" worked because you were the only game in town. You probably could have put a free email address on a paper bag and got business because they had no other options. But you know as well as I do that if someone had gone after you with a well designed, user friendly website and basic marketing they would have buried you.

So I agree. Not everyone needs a professional. Some people just want to put something up...whatever it is, just to say they have it. But sooner or later...if they stay in business and have competitors... they all call a professional. Just like sooner or later I'm going to call a plumber, or mechanic...because they know what they're doing.

[billbenson]

Well, the real truth there is that very few people have any skills or understanding of how to organize and make something look decent online. It's true that anyone who wants to can learn to use WordPress, but most people have absolutely no idea what they're doing beyond putting some words in the square.

So when I tell someone that they need a professional it's usually because I'm looking at what they've done on their own, or have assessed how little they know and know that it will be years before they stop costing themselves money. But people who think they can do everything on their own the first time out won't get that because just the accomplishment of getting something online clouds their reality because they're so proud of doing something online for the first time. "OMG! I put something on the World Wide Web! I'm like the You Tube guys".

So to them it's perfect. Like the lopsided clay ashtray I made in 2nd grade.

But not all people. I've seen some Do It Yourself'ers knock it out of the park...but it was after a long road of mistakes, tweaking, adjustments and wasted money. It's true, they learned.

I agree. And I forget that it took 5 years to make a profitable website. But a lot of people don't have money and need to start from scratch. Study is necessary, but to discourage people from doing it on their own I think is a mistake. Because its a start. To get off to a really bad start like using a site builder is a bad idea. JMO

[Harold Mansfield]

I agree. And I forget that it took 5 years to make a profitable website. But a lot of people don't have money and need to start from scratch. Study is necessary, but to discourage people from doing it on their own I think is a mistake. Because its a start. To get off to a really bad start like using a site builder is a bad idea. JMO

I never do that. I say go for it. To be honest people who've gone through the frustration and overwhelming magnitude of how much there is to know appreciate the services of people like me sooooooo much better when they finally do call. Once they've been down the rabbit hole and spent a 3 day weekend troubleshooting something it takes me 2 minutes to fix, they don't haggle on price like the lookie lou's who think everything online is easy because the colors are pretty. They just want to get it done and most times by now they've made some money to put into it and don't have to struggle.

Honestly, I love people like that.

[Wozcreative]

Gook website design "IS" a marketing strategy.

[Freelancier]

Gook website design "IS" a marketing strategy.It's a tactic. Even for a web designer, it's just one tactic of many that has to be in place to make the underlying strategy work.

My market is customers with IT projects ranging in size from $20K to $80K and those projects affect their top of bottom lines in very visible ways. To be successful with my best potential clients, I have to push three messages: I won't cost as much for the value you get, using my firm is not risky, and every customer is a happy customer. And my best potential client has no real time, so they'll look for someone like me using a generic search like "computer consultant", so I have to display an ad near the top of the first page to be noticed.

So my strategy is to push those three messages using an online presence. At that point, the web site becomes a tactic. How I answer the phone when they call is a tactic, etc. But if all my tactical decisions match and are effective, then the strategy will work and I land the client.

[Harold Mansfield]

Gook website design "IS" a marketing strategy.


It's a tactic. Even for a web designer, it's just one tactic of many that has to be in place to make the underlying strategy work.

I think you mean it's a element of your overall strategy. Tactic implies that it's some kind of scheme.

These days a lot of start up small businesses put all their eggs in one, or both baskets. Website and/or SEO. Depending on what they've read on some blog they may feel one or the other is supposed to do all of the work and make their company successful.

I always tell people the same thing over and over again, if it was that easy everyone online would be wealthy. There's more to marketing a company (even a completely web based company) than a Website and SEO. That's about 20%-40% of it. Now when are you going to do the rest?

A great website will not do it all on it's own just because it's pretty and well built. Now what? Who's going to know that? It's not magic.
But one thing is for sure, a bad website won't do anything at all even when you figure the other stuff out.

The hardest part of my job is talking people down the ledge that see a competitor kicking their ass and then ( without doing ANY actual research) assume that it's because of their website and only their website because that's what they've heard. You know, because the web is magic. 2 guys in a garage and all of that other "just put it online and have instant success" folklore.

I then have to investigate every marketing opportunity that I can find their competitor taking advantage of both online and offline and lay it all out for them. Yes, their website gets the credit for being successful but it's all of these other things that they're doing to get people to it. I've done my job if when they arrive, the site closes the deal and further encourages them to complete the call to action...whether that be buy something, fill out the contact form, or pick up the phone and call.

As the web designer, I can help get you found in search with just the website and nothing else, but only to a point. I cannot make you #1 with design alone or go out into the world and get you customers anymore than your business card designer can. But a good looking card may perk interest and send them to the website (provided you've made a good impression when you handed it to them). IT ALL works together and it's ALL important.

The reason you create a great website is so that all of those other efforts aren't wasted. Not because design and some SEO alone is going to magically draw 80% of your business. You haven't done something special just because you've built a nice website. That's what people with money in their pockets EXPECT you to do. That's just the basics. You're just getting started. It's not some ingenious new idea that no one has ever seen that's going to take the web by storm and rocket you past your competition.

Finishing a website is not the end, it's the beginning. Now you have something that you can work with..now do the rest of the stuff. All marketing doesn't require an understanding of complex algorithms. Sometimes it's as simple as when your business hours are, and how you answer the phone.

[Freelancier]

I think you mean it's a element of your overall strategy. Tactic implies that it's some kind of scheme. You can think of marketing strategy as your overall scheme for getting customers into your sales pipeline and the tactics as part of that scheme, yes. You're maybe using the definition of "scheme" that has a negative connotation. Instead, look it up on Google:


a large-scale systematic plan or arrangement for attaining some particular object or putting a particular idea into effect.
"a clever marketing scheme"
synonyms: plan, project, plan of action, program, strategy, stratagem, tactic, game plan, course/line of action; More

That pretty much sums up your marketing strategy. Each activity you do to support that plan is a tactic.

[Freelancier]

You went back and added a bunch, Harold...


But a good looking card may perk interest and send them to the website (provided you've made a good impression when you handed it to them). IT ALL works together and it's ALL important.Every time you "touch" the customer, whether it's intentional or not, you better have your message right. That means if the customer gets voice mail, the greeting better be clear and match the impression you want to give. If a potential customer hears about you from a friend, it better be a glowing report. When the customer is looking for someone like you, your messages had better be front and center and connecting with the client.

It's a little depressing when I find a web site for a small business and they tell me what they do, but never explain in clear terms why I should bother to contact them. "We're the best" isn't a message, that's a false boast. "We specialize in customer service" is worthless as a message, everyone will tell you that. Tell me what you do differently that will leave me with the impression that you're better than everyone else.

Remember what I wrote earlier about the messages I want to convey and one of them being lowering the client risk. One of my primary messages is "Money-Back Guarantee". How's that for lowering my client's risk? (The offer is limited to the first $10K, because I know I had better show my value within that first $10K or the relationship is going to be a failure anyway.) No one else is going to offer it, so not only did I differentiate with my message, for those customers worried about risk, I just jumped to the top of their short list.

But back to the OP's question: none of this tells you what your budget is supposed to be. It tells you that you start with your strategy, figure out your tactics to support your strategy, then budget for implementing the ones that are likely to reach the most potential customers in the shortest time. In that order.

[Harold Mansfield]

You went back and added a bunch, Harold...

Ha. Yeah, I tend to do that a lot because I always forget something I meant to say. But it's a good analogy of developing a marketing plan. You can't one time it, or just come up with an arbitrary budget without any idea where it will be spent and why.

Just like I'm always fine tuning my thoughts, so should you also always be fine tuning your marketing strategy because there will always be opportunity to do so.

[NeilS]

Personally, I don't believe in a specific rule when it comes to defining a marketing budget. I tend to start by defining a budget I'm comfortable with spending. And then breaking it down on how I want to market and estimate the costs associated to each task and then work with it until it matches my comfort levels. No science behind it really.

[Harold Mansfield]

Yeah, me neither. There's always a goal or budget for certain things that I want to do in the upcoming year, but as fast as things move and change online it doesn't matter what I say in January, if something comes up in April that I want to do because I think it will be beneficial I'm doing it.

Or the opposite. Last January I may have set aside a Facebook budget. Then in April Facebook changed how your followers see your updates. Time to adjust. No sense in barreling forward when they threw a monkey wrench in your expected ROI.

[calthomson]

Who are your customers?

[nerochat]

Thanks for your replies. I mistakenly asked the question under "Internet Marketing" I meant general Marketing.
For example you want to sell your product for X$, but you know that to success you need to pay for ads, re-sellers, etc. So you add Y% to the price.
Do you think Y depends on what product you sell?

[ryantc]

Three Steps To A Solid Marketing Budget
Step #1: Organize Financial Information. Understanding your finances starts with organizing your revenue information. You need to know how much money your company makes on a monthly basis and the variations that might exist.
Step #2: Determine Where You Want to Spend Marketing Funds. You will want to start organizing how to spend the funds based on the amount. If you have a limited marketing budget, then you should probably consider small print ads, online ads, social media and email advertising to bring in new clients.
Step #3: Assess Data and Make Appropriate Changes. If the strategy does not bring in new revenue in excess of the cost, then it is better to remove that strategy and try something else.

[GaWebDev]

SEO is only part of your marketing, not all of it. A poorly placed ( well designed) website can make money all day long through ads, referrals, lists, social media, and other marketing avenues. 99 times out of 100 an ugly one cannot do the same.

I knew I liked you for a reason Harold... ha ha. My sentiments verbatim. On the topic, make a very exhaustive and educated review of your message. There's tons of money wasted all the time on attempting to deliver a message that's either unclear or poorly conceived. So much can be said about marketing savvy and so many variables around a topic that's ever-changing and evolving. What works well for one business model may fail miserably just 50 miles down the road. Best wishes and be sure to hit me up if any of you ever completely figure out the magic formula for consistently exceptional marketing on a budget. ;)

[chiku]

Hi,

I know there are a lot of articles saying you should invest X or Y%.
I want to ask you, from your experience is it worth to invest more then 10% in marketing and how to determine
the initial marketing investment.

[MKarp]

To be honest with you, a lot of internet marketing can be done for little or no cost.

Of course, this is ideal in the beginning, but once you have the capital to scale up you definitely should.

But if you're starting out and your team is learning the ropes, just scour the internet for free internet marketing resources, techniques, and tactics.

As starting point, look into:

- Content marketing
- Content promotion
- Link building strategies
- Google "The Skyscraper Technique" and read through Brian Dean's website

There are free or low-cost ways to implement all of those online marketing tactics.

[DigiWizi]

Think about it this way, marketing is how you generate leads or drive your business. Why wouldn't you invest large amounts in it? Just be sure to do your research and find the real experts in each field.

[Bo Nardin]

If you try to invest in online advertising it is a good idea to start on Yahoo or Bing.
Why?
Advertising on Google is very expensive and on the other hand it is getting more and more complicated because of all the regulations.
Yes, there are fewer people on Yahoo but then again every new PC has got installed Bing into system.
Before going online and advertise, it is a good idea to make some research on internet marketing.

[Freelancier]

Advertising on Google is very expensive Only until you figure out how to reduce your costs. Like make sure you're NOT the number one listing for a search, because that often gets clicked accidentally. And liberally use negative keywords to eliminate weird words that people might put in their search (my personal favorite negative keyword for my business turned out to be "prison"... I have no idea what those people wanted, but whatever.). There's a reason Google is much more expensive than Yahoo and Bing: more people use it for business searches. So you go where the money is. Unless you're a consumer product, then being on Bing is likely a good idea.

[billbenson]

I completely agree with Freelancer!

[RR151]

With a bit of a different view...

Marketing budget should be directly related to being able to measure the value of each advertising opportunity. In today's Internet world we can measure every opportunity then decide what works and what doesn't work.

Example for your business phone: Is your Yellow Pages phone number still working? To measure this over a period of time, you ask every phone call that comes in this: "Can I inquire to where you found this phone number?"

Remember: this is only asked after you are done with the business reason for the call. Then keep track of where they found the phone number. It might be the Yellow Pages, it might be Google, Bing or Yahoo or maybe Yelp etc...or maybe some where you would never expect.

Bottom line all marketing strategies are measured and tracked. Start small and build your tracking tactics for all advertising.

So what is the budget? I like to think I can make money on all marketing I track. If not move on to the next opportunity....bottom line you know where your money is going...

You can also track the value of the call...So a new client found your phone number on Bing and he/she just purchased over the phone $2,000 worth of goods...mark this beside location.

[RR151]

Marketing should also track…

How many customers do you have that visit your business regularly?

If you know this number then are you aware of the lifetime value of this list of customers?

If by now you have not given a serious thought, it’s time you do now. Customers are important and the VIP client is king. They can make or break your business and there’s no two ways about it.

If you already know that, I can bet you take extra care with each and every one of these special business clients of yours. There is a simple formula used to determine the value of each of these VIP client.

Let’s see how it works.

To find out the value of the customer one needs to know two pieces of information. 1) We first need to know the average gross business a customer does a year and 2) Next we need to know how long the average customer does business with you.

“1) How much does a Customer spend with you per year?” TIMES “2) how long the average customer does business with you?” = Lift time value of the customer.

Here is a restaurant example:

So if you have a customer that joins you every Friday night for the last five years and buys the same meal at each sitting for $20.00 then the life time value of this customer is 4 times per month, X $20 per visit X 12 months per year = $960.00 X by 5 years = $4,800.00.

Do you know the value of each of these customers in your business? Do you also realize that these customers are better called Clients and they usually have great respect and loyalty to your business? They are Raving Fans that pitch your business at every opportunity. You should also realize that they should be treated as loyal VIP clients and not taken for granted.

How do you treat your best Clients?

[Paul Elliott]

What are you selling, Alex?

Paul

[Kumar Palani]

To answer bluntly it's a tricky question even for the most skilled business people.

In general the amount you invest on marketing should be based on the need for your product/service, competition you face and your production capacity.

To start with marketing success can bring both fortune or pain. When you reach the max production capacity you should pause your marketing and sales effort to match that of your production, other wise your production capacity will be overwhelmed. In this case it could either result in errors (quality of the product/service) or delay in delivery time, both could hurt your reputation. Most business men forget this simple logic and some times over promote and over reach sales.

[nerochat]

Paul,

For some reason I didn't get website notifications.
We sell a website live chat widget

[nerochat]

Everyone thanks for your answers.
I have an update and more questions.
So we invested in marketing like Google adwords, Facebook, Articles, sending e-mails directly to potential clients and we have few stable clients.
However number of converted clients is not satisfying.
Any suggestions how to proceed ? What do you think about out-sourcing marketing and sales ?

Thanks

[Freelancier]

However number of converted clients is not satisfying.

Use nerochat.com to convert visitors to customers.
What's wrong with this picture?

[nerochat]

Ha :) Nothing wrong, we just have visitors from non relevant fields ( like people who search for adult chats )

[fullflavor]

As a general rule of thumb, companies should spend around 5 percent of their total revenue on marketing to maintain their current position. Companies looking to grow or gain greater market share should budget a higher percentage—usually around 10 percent.
This percentage, of course, will vary by company and industry. For example, companies in highly competitive industries—such as retail, consumer products, and pharmaceuticals—often spend 20 to 50 percent of their net revenue on marketing.
Using the general rules of thumb, calculate your company’s ideal marketing budget below:

Total Revenue x 5% = Marketing budget required to maintain current awareness and visibility
Total Revenue x 10% = Marketing budget required to grow and gain market share

[veritasvisions]

I'd say as long as you have a system where the return is at least 2 to every 1 dollar spent, keep investing more and more. But only invest and bring in clients to the extent you can handle the work load.

[MosheC]

Thank you Harold.

After paying 14k to learn seo I can tell you that it's not the only way to market, and that the quality of your site will not only convert better but get returning visitors.
You want to get quality traffic find out where your target audience is, and get in front of them. Don't get me wrong there are some seo factors that need to be placed in your site. But don't thing that implementing them is all you need to do.

As for the amount I would advice to use for advertising:
It depends on you, if it was me and I had another income such as a day job. I would keep investing all profits into the business till it was big enough to allow me to withdraw whatever I wanted without being worried about next month.
To do that I would let the business grow to a point it has that income for a year at least in the bank. Incase something where to happen in the market I would have time to adjust without having to look for another day job.

I hope this helps

[99social]

I think this will greatly differ between businesses, but a lot of it is learning to get the most for your dollar spent. A lot of revenue could be wasted on methods that don't or aren't working for you. A lot of business owners want to take on some of this work to save some $$$, but could have their time better spent elsewhere.

Do some research, and wherever you decide to invest - make sure you are using services/professionals that are reliable and have some way of providing you with reports of how well their methods are working for your business.

[amjenx]

10% is great when you're starting out. Like if you have $3000 working capital, stick $300 into a wise channel and test. You need clarity to know what you're buying for your dollars. Email marketing is king; Mailchimp is great to start out with before integrating another option. Once you've tested, you'll know 'x' for one lead yields 'y' ROI. Once you figure this out, you'll put x in and get y out. Good luck!