The Marketing Question Every Business Leader Should be Asking
One of the most common questions business owners ask 6P is:
How much should I spend on marketing?
For marketers, this is a loaded question with sweeping implications. Quote too high a number and you risk coming across selfish. Quote something too low and your value may be called into question. Factor in each individual's perceptions of what qualifies as too high or too low, and there just isn't a right answer – at least not without more substantive information.
So, here are a few places you can start to help form your opinion of how much to spend on marketing:
1. Your Past & Your Gut
If you are asking the question above, then it is likely that you've personally grown your business to where it is, and have some familiarity with what sort marketing tactics work for your business. Having said this, I would pose two key questions to you:
Question 1 - Were your prior marketing and advertising efforts conditional on the work of a leader / founder or a very limited number of key people in the firm?
Question 2 - Is this approach scalable? Is it possible to continue growing the business in the same way going forward?
Examine your answers to these questions, and identify opportunities for growth. You will find yourself one step closer to the answer for your question.
2. Industry Benchmarks:
Even if you are offering a wholly unique product or service, there are comparable industry figures you can examine to determine your standing in the marketplace. Here are a few sources for you, which will complement any industry associations you are part of:
Source 1 - Industry Canada: Financial Performance Data
Source 2 - Wall Street Journal / Deloitte USA report (Jan 24, 2017)
Source 3 - Wolters Kluwer Almanac of Business & Industrial Financial Ratios Report (2018)
Source 4 - Talk to local Government agencies that have access to larger reports. Manitoba: World Trade Centre Winnipeg: Business InfoCentre
By comparing your businesses to industry examples provided in lists above, you will be able to arrive at a better estimate for your marketing expenses.
A few disclaimers to any benchmarking information you use:
- You will want to localize the figures (size of company and geography). The percentages noted are likely high, especially for Canada and specifically for Winnipeg; still they are good to know.
- Try to consider B2B vs. B2C figures and ensure those you are comparing relate to your business.
- Per the article noted in Source 2 (WSJ), most companies would fall into the category of a company where "Marketing is not a Revenue Driver" so your figures would trend to a lower than average value than shown. Having said that, if you aim to change this, you should consider adjusting your budget to achieve this goal (if it is a goal of yours).
3. Ask a Marketing Expert:
Someone who has planned strategic marketing programs for numerous businesses, likely knows a thing or two about how much should be spent. A good strategy that they would employ is a phased approach to marketing expenditures; no one should go from 10 miles an hour to 100 miles an hour in 5 seconds.
So, when it comes to finding out the answer to how much you should spend, first see if you can learn a bit more about what should be done and what others have done, but also consider whether your business growth goals are in alignment with your marketing budget.