Be it the brick and mortar business or the eCommerce business; every business needs to understand and acknowledge the importance of marketing. Marketing is one thing that can change the fate of any business. No matter if your product is revolutionary, if you don’t market and advertise them the right way, people will not know about it.
Your consumers must know about your product to make a sufficient number of sales and spread the word about how great your products and services are. In terms of online business, their first and last thought to opt for online platforms is social media feeds. If you want to create a loyal customer base, word of mouth plays an integral role. Thanks to social media, the share button is the new word of mouth.
However, whenever you are looking for advertisement and marketing of products and services, it is essential to make an upfront payment in terms of investment. Many businesses have an issue while spending money on marketing, and this behaviour is widespread with small business and startups who have a lesser profit margin or a budget to work with.
Never the less, finding the right budget for your ads should be taken very seriously. In this article, we’ll share a few tips that will help you find the right budget for your marketing campaigns. While deciding the budget, you need to consider the operational time and tenure of the business along with the business size and current sales. So, let’s have a look!
There can be variations according to the responses of economists. However, an average of approximately 7% to 12% of the total revenue of the business’ sales is allocated to marketing their products and services. Can this apply to every business? No, because every budget calculated should be formed of numerous factors taken into consideration such as, but not limited to:
- The goals the company has for its marketing campaigns,
- How big are the profit margins are on their goods and services
- The size of the marketing campaign and the platforms they’re advertising on such as Google and Facebook
- The level of demand and competition in their niche
Feel free to use the above average as a rule of thumb for your marketing budgets to start testing with. Once you see a profitable return on investments, you should be allocating more financial resources to your profitable campaigns and to accommodate your business’ operational workload.
If your business is in the process of covering costs or operating at a loss, no wise person would suggest using 7% to 12% of your revenue on your marketing budget. Marketing isn’t devised to cut down the already lowered profit margins; instead, they exist for growth and need to be applied in a way that increases the sales volume. The above budget estimate should not be applied to small businesses.
Remember, marketing is an investment in your business and not another expense. If you don’t see any improvements or a profitable return on the marketing campaigns you’re testing, allocate your resources on a different test trial. In the case of small or new business, there might be no fixed option or numbers regarding the revenues.
It is better to calculate the revenue and choose the estimated percentages, but this needs clear cut information about sales growth. However, this can be dangerous if you don’t have prior experience in the field. For instance, if the estimates are too high, you might overspend, which will reduce the resources for business operations.
ROI & Fixed Budget
While you are a new business, it is better to stay careful with your money and use fixed budgets. It is better to make a fixed budget that your business will be able to afford to lose if your marketing campaigns failed. However, the fixed budget is designed to keep the business from operating on a negative return on investment. Finally, make sure that you calculate returns on investment (ROI) as it will help set a budget!
If you need further help and guidance on creating a budget for your marketing campaign management and what type of platforms and marketing assets suit your business, please do not hesitate to contact the online marketing agency now.