Every business, from start-up to fully established should have a well defined marketing budget.
Marketing is the lifeblood of a business and a key component to success. Simply put, you can’t afford not to have it, especially in 2023!
How much should a small business budget for marketing?
There’s no one size fits all solution when it comes to establishing a marketing budget, but there is a formula which will help you determine a budget for your specific business.
First, you must determine what your average transaction value is. If you have several different products and services at varying price points, break those price points down into tiers.
Calculate how many transactions you perform in each of the tiers. Then figure the average transaction value for each of those tiers.
Next, you’ll need to know the lifetime value of a customer. How frequently do you do business with them and over what period of time do you keep them as a customer?
For example, say you typically do business with your customers once a month and you usually keep them for 2.5 years. 2.5 years is 30 months.
If your average transaction value is $100, that means a customer (on average) is worth $3,000.
It’s not uncommon for the cost to acquire a customer to be more than the average transaction price. You have to decide how much you’re willing to spend to acquire a new customer.
With that being said, it’s important to remember that the company who can spend the most to acquire a new customer will win the market share value every time.
You can learn more about this formula and how to apply it to your business here.
Where To Spend Your Marketing Budget
There are a few factors to consider when determining where to spend your marketing budget.
The first one being your target audience. Who are they and where do they live? What platforms do they spend the most time on? Where do they go to search for your products or services?
Secondly, think about the primary purpose for your marketing. What are you trying to accomplish?
Maybe your goal is to drive brand awareness or maybe it’s lead generation and conversion.
Also, evaluate your competitors. Where do you see them marketing the most? Is it paid advertising, social media marketing, SEO?
The answers to these questions will help you develop a strategic plan for allocating your budget.
How To Allocate Budget For Digital Marketing
Once you understand your audience and what you’re looking to achieve with your marketing, you can then assess how to allocate your budget.
There are five primary areas to consider investing in.
If you only have enough funds to invest in one type of marketing, this is the one. Your online reputation is made up of your customer reviews. Consumers trust these reviews as much as personal recommendations.
This is the single most important marketing method a business can implement today.
Funnel Automation
A marketing funnel is your primary tool for setting yourself apart from the competition. This is your opportunity to explain why prospects should choose to do business with you rather than the multitudes of other competitors.
Paid Search Advertising
If you want fast results, paid advertising is how you can achieve that. Whether you’re utilizing Google, Bing, Facebook, or cold marketing banner ads, the paid approach will put your business in front of consumers who are searching for what you offer.
Social Media Marketing
This approach is geared towards building brand awareness, cultivating relationships, and nurturing potential customers.
Search Engine Optimization
Statistics show that 85% of customers find businesses by using search engines. This means if you’re not utilizing SEO, you’re only reaching about 15% of your potential target market.
You may be thinking to yourself that you’d like to expand into each of these areas of marketing for your business. That also may raise concern over what the cost would be.
Here’s the good news – you don’t necessarily have to pay for all of your marketing upfront. Some companies offer payment plans.
At The Alchemy Consulting Group, we offer our clients flexible financing options. If you’re looking to grow and scale your business in 2022, we can help.
Have Questions? We’re happy to chat with you about your business and assist you in developing a marketing budget and strategy that meets your specific needs. Book your free discovery call session here: https://calendly.com/gordonvanwechel/45min
