Because I talk to many small to medium size businesses, I get asked this question a lot.
How much should I invest in my marketing?
For most business owners, this question is on the top of their list. Understandably so. Business owners must be mindful about how much money they need to set aside for their marketing.
And with so much information on the internet about how to go about investing in marketing, it can get confusing. Because budget is complex.
Figuring out how much to spend across marketing channels is a dynamic exercise.
As a business, I understand your need to invest to grow and scale.
But I also realize the need to be strategic in where you decide to spend your marketing dollars.
As the person overseeing your eCommerce P&L, it is important to get a practical and actionable approach to figuring out how much money to invest in your marketing activities.
For businesses that are funded, marketing budget takes on an entirely different approach. There’s more wiggle room to spend. There’s a huge difference between a business who has $40m in funding versus a business that is self funded by your personal loans, savings, and credit cards.
In this article, I will discuss how startups, small, and medium businesses can start to invest in marketing.
#1: Start running experiments with small budgets
No matter what industry you are in you can start advertising for very little money in Google, Bing, or Facebook.
With a budget of $50 or $100, you can start testing your ads. Experiment with different ads to see what works. You can try different images, offers, ad copy, and even targeting different audiences.
Don’t be aggressive before you know what works for your business.
Patience will be your best friend here as you learn what marketing channel sends you the most relevant traffic that you can turn into paying customers.
Spending $50 to $100 will not break the bank. But here’s the caveat. With a smaller advertising budget, you will not collect a lot of data or learn quicker than businesses with deeper pockets.
But that’s shouldn’t be your focus. What you should pay attention to things that work for your business.
Social advertising is still affordable and much cheaper than running ads on Google. So if you’re bootstrapped but want to dabble in advertising, I suggest launching your marketing experiments on Facebook Ads.
You could start testing for as little as $5 or $10 per day and start collecting data on your website visitors.
#2: Double and triple-down on traction
After a few experiments, separate out ads that work and put the ones that don’t work aside – for good.
You don’t have time or the budget to tinker around with poor performing ads at this stage of your business.
Once you find your winners, double down on the spend. It doesn’t matter if you are not profitable now. Because what you’re going after is figuring out how much volume you can push into your business.
This is where many businesses tend to do the opposite. When they see sales increase, but ROI decrease, they immediately pull back on their marketing spend. This knee-jerk reaction will cause you to throttle your ability to scale your business.
Instead, what you should do is continue spending. But pay very close attention to your ROI. I’m not asking you to operate at a loss and not focus on profits. That’s not what I’m saying here — at all.
What I am saying is this.
Push the envelop of your marketing advertising campaigns that work. Drive it to its tipping point. That’s when you start your next steps — fine tuning.
#3: Fine-tune your marketing dollars and advertising campaigns
Now that you know what ads work and have validated it by doubling down, it’s time to fine tune your marketing to maximize your return on investment.
This is where you will spend most of your time.
Here is where it gets interesting. Just because you found traction, it doesn’t mean you continue to pour money in without considering your conversion rate. It doesn’t matter how much money you invest in marketing if your website is not converting to its maximum potential.
The single mistake marketers make is to add more fuel to the fire and continue to drive their online sales.
But the ROI is not favorable. So now what?
Over 18 years of being a marketer, I realize that us marketers always point fingers to website conversion rate. We tend to blame the web development team for building a bad converting site, or performance issues.
I hear this all the time.
When a marketing team finds a campaign that gains traction but cannot achieve a healthy ROI, they start to blame the website’s conversion rate for poor ROI.
There’s definite correlation between conversion rates and ROI, but make sure you are fine-tuning your ads.
Test everything from ad copy and images to landing pages and offers. There’s always something you can improve on to drive better ROI.
#4: Increase your investment
As you fine tune your advertising campaigns you will learn the most efficient channels to invest more marketing dollars in.
A mistake marketers make is rushing to spend more money too fast.
There is no need to rush — there’s plenty of customers on the internet looking for your services or products every day.
The most important thing is to execute, learn, iterate, and improve.
You might have read somewhere on the internet that speed to market is key to success. I disagree with this.
Why?
Because that mindset forces you to accept mediocrity.
Unless you stumble upon a unicorn of a campaign, then by all means throw everything you have at it.
But for majority of businesses, increasing marketing spend is a gradual process — it is calculated and strategic.
On the other hand, if you do find an opportunity, don’t sabotage yourself and overthink your next move. Increase your marketing spend to take your business to the next level.
Conclusion
For any business that is not venture capital funded, it is scary to start investing in marketing — mainly because you don’t know how much or little you should start with.
As a general rule of thumb, if your business is marketing for the first time, start with a small experimental budget of about $50/day, which is approximately $1,500 per month.
Run as many test campaigns as you can with that budget. Don’t expect to generate a huge return on your initial spend — that’s not the purpose.
What you are trying to do is to identify things that work and fine tune to make it better.
Don’t rush into spending more money until you figure out what works with your experimental budget. This could take days, weeks or months. Be patient and you will win in the long game.
Follow these simple steps above and may your business thrive!
