Let me explain. I often sit down with business owners or look at financial statements and see situations like this:
B2B Industrial Components Inc.
(in thousands of dollars)
2014 2015 2016
Annual income 12,000 11,500 10,750
Marketing and advertising 40 42 45
What does this chart show us? It shows us a company that has solid revenues but is not investing enough in its marketing. This is unfortunately an all too common situation. And it is happening at a time when Canadian competitiveness is declining and new technologies are transforming the way businesses thrive.
As a very general rule of thumb, if you’re in business-to-business, you should be spending about 2% to 5% of your gross revenue on your marketing budget. But if you’re in a consumer business, you should be spending 5% to 10% of your gross revenue on marketing. Of course, these percentages will vary depending on your industry, the size of your business, your competition, and more.
Apply the 3 A rule
At BDC, we see every day businesses that succeed because they have leveraged marketing. That’s why we’re doing everything we can to convince Canadian business owners to put the 3 A’s into practice.
Learn – Learn how to use new tools and platforms.
Scale – Increase your marketing budget to reach your desired audience.
Attract – Use the right channels to grab your customers’ attention.
We want Canadian business owners to create marketing funnels and connect with their potential customers through high-quality content and relevant marketing activities. Business owners who want to do this need to understand the new reality of marketing in 2017.
Pay to win
Just five years ago, all it took was a little SEO and some free content to share on social media and you were good to go! But with the advent of new algorithms, businesses can no longer rely on organic search and social media followers and subscribers (earned media exposure). Now, if you want to use the web to attract new customers, you’ll probably have to get out your wallet.
The idea isn’t to stop creating dynamic, shareable content and optimizing your website, but rather to keep going. The way you distribute content, in particular, has changed; it increasingly depends on your customer base and the size of your budget.
Marketing is a technology business these days, and that trend is becoming more and more evident. Business owners who spend their time and money without considering this reality are going to regret it. Disruption is the new normal. Think about it.
Now, before I go off on all the traditional marketers, I should point out that conventional tools like TV, outdoor, and print ads are still effective at reaching a very specific audience. But I should also add that with the $5,000 to $10,000 your billboard will cost you next month, you could be making a lot of targeted, quantifiable ad placements.
Evaluate your expenses, whatever the amount
Remember, beyond the budget numbers I talked about earlier, B2B business owners are all about reaching new prospects. That’s why you have a great sales team that can convert those prospects into current customers, right?
Things are different for consumer retail, because it’s about using marketing to draw potential customers into the sales funnel so they can then buy online or in-store. So you need to be able to hold the attention of customers.
So where should you invest your limited time and resources? To maximize the impact of your budget, you need to know as much as possible about what’s engaging your customers at any given moment. That should be the foundation of your strategy. And let’s not forget that repeating the same formula as last year and increasing your budget by 5% is not a strategy.
Stay informed
If you want your marketing efforts to be effective and, by extension, make the most of your budget, you need to know what works and what doesn’t. That means understanding the ins and outs of new marketing methods. That means knowing everything there is to know about Google AdWords, Facebook ads, programmatic media buying, and YouTube videos.
That said, I’m also a very down-to-earth person. I know that a advertising database business owner shouldn’t do everything on their own. Your job is to be yourself – an amazing person – and run your business. But you also need to be able to critically evaluate what your marketing team is offering you. Surround yourself with great partners and staff members to whom you can delegate tasks, always encouraging them to get the most value for their budget.
Keep a close eye on your marketing budget
Budgets need to be reviewed regularly and adjusted based on what is working and what is not. An annual review is not enough: do it every two weeks or every month. Too often, money is misplaced or wasted because things are left to go. But today, everything moves too fast in marketing to afford this. For example, what worked on AdWords last month may not work this month.
Likewise, what worked well for you in marketing last year may not be relevant this year. Here are some ideas to consider for your business. ( Note: This data is fictional; use it only to stimulate your thinking.)
B2B Industrial Components Inc.
(in thousands of dollars)
2015 2016 2017
Annual income 11,000 12,000 14,000
Marketing and advertising 40 45 250
Google AdWords SO SO 75
Facebook Ads SO SO 60
LinkedIn Ads SO SO 30
Video production SO SO 35
Trade fairs SO SO 25
Outdoor advertising SO SO 15
Outdoor advertising SO SO 10
Start thinking seriously about how you reach your customers, and I bet you'll get a lot more out of the same marketing budget. When you do, you'll see that things will get a lot more interesting as your business slowly grows the way you always wanted it to.
What do you think? Do you feel like it’s too complicated? Can you learn to look at your marketing data with a critical eye? We’d love to hear from you.
Chris O'Shea - Senior business advisor, advisory services at BDC
Chris O'Shea
Business Advisor
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