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digital marketing - how to allocate your annual marketing budget

An Annual Marketing Budget Gives Your Business a Competitive Edge

Being seen means getting clients. In order to stay relevant among the competition in today’s market, it’s crucial to consistently remain visible. Money spent on a company’s image is an investment in future sales. Digital marketing costs should make up more than half of the money you spend on marketing your company, so create and stick to an annual budget.

Be consistent in your budgeting but flexible in how you spend it

It’s wise to draft next year’s budget in the fourth quarter. Make sure that it has been finalized by December 15th. One of the most important aspects of marketing is maintaining consistency. Percentages spent on marketing should never dip below 3% of overall revenue for mature operations, even during times of economic hardship. Throughout the Great Recession of 2008-2009, Lang’s Kitchens continued to spend 3% on marketing and it paid off. Smart and consistent marketing always pays off. If people don’t see you, they don’t know you, or worse, they forget you.

Remain consistent in your budgeting, but flexible in how you spend it. For instance, Google changed their blogging standards at the end of last month. In order to get the same ranking results, bloggers needed to post 1,500-word entries instead of the previous 750 words. Competitive businesses in 2021 are now paying for 1,500-word blogs instead of 750, to stay visible after Google changed these ranking requirements.

Where to put your money

The top tier of marketing investment should be in digital content. Lang’s invests in our website first, closely followed by SEO and video marketing. These are all priorities, but to remain ahead of the curve, the ranking of these investments may change position at any time. Just as it’s important to keep your goals the same, it’s also important to make adjustments to the factors that help you achieve them.

Money spent at the right time can do more than you expect it to. $500 on social media platform ads for two weeks could be exactly what your business needs at the end of the year. Lang’s business put $500 into two weeks of Facebook ads last December, and phones rang off the hook. Retainers practically doubled from past years.

It’s not all in timing. Planning the marketing of your company so that it is visible and carrying an elevated reputation in the eye of the public is crucial to brand development. Pay a professional to do it — they will get you better results! Using the right service for the job is part of marketing consistently. Let the experts choose the right wording for long tail keywords, and make sure they are optimized on a month to month basis.

When the going gets rough, spend more

Recessions are when most business owners cut their market spending. It’s easier than cutting underperforming personnel, but it’s a good time to tip the hard times in your favor by being the only one out there. Historically, most businesses reduce or cut their marketing budget during a recession, although it’s a far savvier idea to increase budget spending during one. Keep marketing during a recession — increase what you spend — you will gain serious market share! Never cut marketing — it’s too valuable to the health of your business — and if you can, increase the percentage of your overall budget spent on it during economic lows.

There is something admirable about the business that stands out among the competition. It may be because they’re known to be a dependable brand, their style is attractive, they’re staffed with excellent people, they’re around and you trust them. In times of economic hardship, it’s a good idea to spend more money on marketing. It’s the opposite of what some people expect, but when you market your business during a recession, you’re not just demonstrating that your business is resilient; you might be the only name buyers see! Most industry players’ reaction is to cut marketing dollars during a recession, but the smart answer is the opposite move—increase spending, even double it.

Last year, when the Covid-19 economic crisis took hold in March, SEN doubled its advertising budget from 4% to 8%. That helped reduce the projected revenue decline by 25%. “We followed the same recessionary advice on marketing that SEN recommends to its members,” said Jenny Catalano, COO.

Kellogg’s is a benchmark example. As the Depression hit at the top of the 1930s, the cereal industry’s leader, Post, cut their marketing budget while Kellogg’s doubled theirs. The company expanded its ad base into radio, and poured promotional efforts into a brand new product called Rice Krispies. Today, Kellogg’s is still the cereal industry’s leader.

Even with this precedent, many companies don’t follow the leader, they hold their money. Instead of making new acquisitions when prices are cheap by investing in research and development, and promoting their own stability during difficult times, they tighten ship and wait for clearer skies.

Put the best brains on the task

Work with your team to develop the “big ideas” that will carry you through the coming year. Have each manager come up with five ideas and compile them with a list of time-tested marketing ideas. Then pull from this long list the most salient ideas that fit your vision of how to grow your business. Filter out ideas that don’t make the cut. When you stack all the ideas up, the ones that don’t address the most immediate concerns, aren’t practical, and aren’t absolutely top tier, are the ideas that ought to wait for further consideration. Use the best of the best, the total of which fits your budget.

Community outreach is an excellent way to spend some of your marketing dollars. Sponsoring a youth soccer team, hosting wine or whiskey-tasting parties, and kitchen tours can be great channels to generate client inflow. One of the best ways to advertise locally is to fund a new kitchen party for an influential member of the community. Outgoing people who are widely connected in your area potentially make great hosts for showing off their new kitchen. One retainer from such an engagement would more than pay for the investment in food and beverages for 20 or so party-goers. Imagine earning a retainer for a $60,000 job from a $1,800 investment. At a 10% net profit, the $6,000 represents a 233% return on your investment!

The strategy changes as a business ages but the message remains the same: show yourself

While money will continue to be spent on the same things, it’s important to fine tune what gets spent where along the way.

A brand new business will want to create a marketing budget that spends between 7% and 10% of projected revenue with a call-to-action whose primary agenda is getting people into the showroom. Young businesses should steadily invest 5% for several years – even beyond establishing their brand. Get the name and logo in prospective clients’ minds, but most importantly, turn them into satisfied buyers who rave about your service.

A five-year-old plus business should constantly market its brand. It’s crucial to keep the company’s name in circulation. Dropping your advertising budget means would-be clients forget about you. This is the phase to release 4%-5% of revenue for marketing your brand.

A mature business,10-or-more-years old, will want to focus on promoting their name. Show your name, show it in every place where it comes to the attention of all the potential clients you are trying to reach. A business in this phase of development should have wide name recognition, and consistently reinforce that recognition with a 3-4% marketing investment of your revenue. The dollars you put into your business preserve the consumer’s faith in it.

Growing a healthy business comes from maintaining the right balance between generating revenue through new clients, and long term clientele and referrals. You don’t want to rely too heavily on either side. Ideally, a little less than 50% of new business should be from referrals. That way, if long-term clientele influence fewer referrals (like during a recession), your business is covered by more than half of its contracts with new clients generated from your ongoing marketing efforts.

—John Lang