Think of marketing as an investment, not a cost of doing business
In my years with the University of Wisconsin-Green Bay Small Business Development Center, one question has continually echoed from small business owners: “Is there a formula that businesses should use to determine their annual marketing budgets?”
I wish it were that easy, but in the absence of a time-tested formula, there are certainly guidelines available. Trade associations, RMA, and others collect national data that provide averages on business operations, sales, and marketing. Many businesses use the past years’ sales to either increase or decrease the amount they spend on marketing.
Truth be told, the question itself uncovers an inherent problem in how many – too many –small business owners view marketing and its role in the organization. By relying on a percentage of sales, operating costs, or any other method, marketing is relegated to what a business wants to spend, instead of what a business should spend.
Marketing is not an operational cost, but rather an investment in the business. As such, this investment needs to be based on good information, solid marketing strategies, and clear goals.
Every year, at the very least, businesses should review their marketing plans with the following questions in mind: Have the target markets changed? How has the competitive field changed? Do we have new marketing goals? What promotional strategies need to be used to achieve them?
Since business is not stagnant, your marketing efforts should not be stagnant, either. By keeping the end goals in mind, owners have a better chance of reaching them.
Once the marketing plan has been reviewed and perhaps new strategies and tactics are developed, then your marketing investment can be established. At that point, it’s okay to ask the following questions: How much will it cost? Can we afford it?
If the answer to the final question is yes – great!
But if not, then a business has to determine what is crucial, what can wait, what has to go, and where the money will come from.
If marketing is seen as an investment rather than a cost, the investment should also bring rewards. A strong marketing plan with clear strategies and goals will often increase what a small business owner is willing to invest in marketing.
Once invested, every marketing cost should be measured for return. Every advertising campaign, sales promotion, and direct sales strategy should bring revenue back to the business.
But unlike with many investments, small business owners tend not to measure marketing. It can be one of the biggest frustrations for the small business owner because without this crucial evaluation, he or she will not really know if a marketing investment is working.
If marketing begins to be treated as an investment, then the results become more apparent – and more real – to small business owners. In any business, there are no easy answers, but answers will come if management asks the right questions.
Sign up for the free In Business Wisconsin Report – your weekly resource for local business news, analysis, voices, and the names you need to know. Click here.