The following is part of a conversation with a potential client. The business is successful and the owner is a wonderful person and inspiration. I asked if there was a budget for marketing and advertising. He replied, "No, we tried it all and at this point do not give it much thought. We really don't feel the need for a budget for things like that." I followed up with "I see you have a full-time receptionist and HR manager and it looks like you've retained the services of a Janitorial firm" The owner replied, "Yes, those are important investments."
Why would you not invest 10%, 5% or even 2% into your marketing and advertising?
Answering the phone and keeping the office clean is very important; however, would not a budget for bringing in business and/or keeping business be a worthy investment? Unfortunately, I hear this often.
I guess there might be cases where business owners are just blessed with a "somewhat perfect flow" of business so they don't see a need for marketing and advertising. Since 1993, I've really only seen a few where that's the case. A couple of those, were businesses owned by individuals only interested in hanging on or slowly closing their business due to retirement or poor succession plans.
What is the actual cost or, if done right, INVESTMENT? It depends on the business and whether we are talking B2B or B2C. Overall, based on experience, working with businesses since 1993, and talking with successful marketers and advertising agencies, I would say the advertising and marketing budget of most small business should be 5% to 10% with 50% to 60% of that 5% to 10% going to advertising and 50% to 40% going to marketing.
What should my Return on Ad Spend (ROAS) be?
A 2012 Nielson Company's report states overall efficiency of marketing strategies in markets with highly competitive with price concious consumers amounts to 9% return on average. Of course that seems like every market in Today's world. That same research also found that, on average, advertising effectiveness could be increased 30–40% with the right strategies, mediums and platforms and efficiencies.
The formula is ROAS = Revenue / Advertising