Strategic Marketing: How Much to Invest?
Caliber Media Group’s Series – Part 4: “Marketing as an Investment: Short Term and Long Term Strategies that Generate Results”
If you’re just joining us we’re talking about viewing Marketing as an Investment…not just as a cost-center. So let’s look at how much to invest in marketing initiatives…
If you invest the dollars, you will see growth. The key is to invest them wisely and strategically, in tactics and solutions you can measure. But how much should you spend?
According to Bloomberg BusinessWeek, an average of 5% of annual sales is a good place to start. And if you’re in a services business, they recommend bumping the starting point higher than 5%.
“Volume-driven companies tend to spend a tiny percentage of sales on marketing, in part because their large revenues enable small contributions to add up fast, and in part because of the margin pressures they face in having to compete with other high volume companies. By contrast, margin-driven companies tend to spend a larger percentage of sales on marketing: They have room in their margins to afford it, and they’re often working from a smaller revenue base.”
Sample Marketing Budget Breakdown
So perhaps 5% of your annual sales as a B2C company is $500,000. It may sound like a significant marketing investment, but let’s look at a possible scenario for what it might generate in sales.
- You may find that your investment of $500,000 puts you in front of 100,000 potential customers and you expect a conservative conversion rate of 2%.
- You can expect then that you will generate 2,000 orders and let’s say your average sale is $500.
- Ultimately your initial $500,000 investment will generate $1M in new sales (which is also a 10% increase in total sales).
Wondering where to start? Give us a jingle or drop us a line. We’d love to chat.