We will cover a few topics on how to help figure out the right budget and the right allocation. Below are the areas we will cover.
- What percentage of my business's gross revenues should I put into marketing?
- What percentage of my marketing budget should go toward traditional verses online?
- What type of mix should I have with my online advertising?
- How do I plan for seasonality?
When running a local business having a plan and executing that plan is vital for your survival. Local businesses are getting hit from all sides and have competitors at every turn. Local small to medium sized Philadelphia businesses need to compete against other Philly SMBs, national chains, e-commerce companies and more. With that in mind, it is very important to have a budget and stick with it.
Lots of businesses shoot from the hip when determining their marketing but that will lead to a ballooning budget. When looking at how much to spend, there are consultants that recommend 7-8% of your gross annual revenue. I personally believe that this is a very aggressive number and usually advice my clients to be in the 5% area. Throughout this blog we'll use an example of a $3 million a year business.
Revenue = $3 million
Annual Marketing Budget = $150,000
Monthly Marketing Budget = $12,500
Percentage Toward Online & Offline
Very soon the total advertising dollars of online marketing is going to exceed that of traditional marketing. Just last year in 2012, $39 billion was spent in online and $33 billion was spent on print advertising. 2013 is showing to have more of the same when it comes to spending online marketing dollars. This coming year it has been shown that there is going to be an increase of 5% spent on marketing online.
The question for local Philly businesses is, how much should I put to digital advertising? I recommend that clients typical allocate 50% of marketing to traditional and 50% toward online. I make the case that traditional marketing is still important to driving the message out locally and it is still expensive. As an example, it's about $850 for one spot on WMMR morning drive so to keep a consistent message it is going to take a healthy investment. When thinking about where to place your advertising dollars make sure to place it in the right place because you need a lot of frequency to accomplish top of mind awareness. In our example of $3 million business, about $6,250 should be dedicated to online marketing and $6,250 toward offline advertising.
Marketing Mix
Now that we have a breakdown of how much, the next logical question is where do we invest? To answer that we need to understand what is out there in terms of digital marketing.
There are some key areas that we group digital marketing into and below are the main areas:
Search Engines
Brand Building
Social Management
Email Marketing
Search Engines
- This breaks down into two major areas
- SEO (or search engine optimization)
- When it comes to investment, this will take an initial payment and then usually a month maintenance fee.
- I usually advise my clients that building a quality site with a blog and updating both is the best investment of time. If you do this upfront work, the monthly investment for SEO should be minimal.
- Example...with our $3 million company I would recommend $500 a month on SEO
- SEM (or search engine marketing)
- Google, Yahoo, Bing and the other search engine have a marketing platform that allows for you to bid on keywords and pay for visits.
- With the changing algorithm at Google and the rest, it is important to keep placement on the search engines with a good strategy of buying keywords that get calls and emails.
- Each industry is different and the cost per keyword varies so budget should reflect the competitive nature of your industry. You can go to Google to see how competitive your industry is by visiting their keyword tool
- Example...with our $3 million company we will say that they are a HVAC company that is in Philadelphia that wants to target AC keywords. A locally targeting campaign could run up to $3000 a month.
When it comes to push messaging online there are lots of ways to go about getting the message out. Banner ads are a good way to get the brand image to the right people. Banner ads have been revolutionized over the years. Through cookie tracking you can now focus in on specific demographics and search behaviors. No longer do you have to waste your advertising dollars on one-off newspaper websites or just on Comcast.
- Banner Ads
- Remarketing and Retargeting allow businesses to push their message to a very specific market of people. You can target people that have been to your website as well as people that have been searching specifically for your product or service.
- This type of advertising is bought on cost per 1000. That means that when a 1000 people see the banner ad the client is billed a fee. That fee is determined on how valuable the website is and how much it is worth to the other companies bidding on it.
- High traffic websites like ESPN, CNN and others can charge up to $40 per CPM. Smaller blogs and niche sites can be in the $1 to $3 CPM range.
- Example...our $3 million company can push messages during their core business season with a $1000 budget.
- Social Marketing
- My personal experience with local Philadelphia businesses is that marketing on Facebook is not worth the investment. For some businesses I'm sure it can work but I have not seen this with local SMBs in Philly.
- Social Management
- When it comes to building your network and managing your reputation, this takes a lot of time and knowledge, which most local businesses don't have the time for. An investment in social, for the right business, can help make all the difference when buyers get into the decision making mindframe.
- Typically when you outsource social, that involves them building your followers, engaging your fans and managing your reputation. Each week there needs to be post and content published to build your following.
- Example...a month budget for social can range from $500 to $1500 a month depending on your needs
Email marketing is a key part of digital advertising. It can be used to send coupons, inform about specials, education about events and much more.
- Development
- You will want to build a list of emails as consistently as possible. Every new prospect, client, customer, friend or passerby should be in your email data base. As you build your list it is important to develop a consistent communication cadence. You don't want to over do it but you want to have some method to your madness.
- Implementation
- I recommend Constant Contact to my clients as an email platform. It is inexpensive and easy to use. If you need more detailed looking email platforms, then you will need to outsource it and find someone to assist you.
- Example...a monthly investment should be around $100 to $500.
Budget Breakdown (for our $3 million client)Search - $3500 (SEM & SEO)
Branding - $1000
Social - $1000
Email - $100
Total Monthly - $5600
This leaves some additional funds (roughly $650 a month) to be invested throughout the year to website updating and one off marketing ventures.
Seasonality
Not every business has a static monthly investment that it makes toward marketing. Typically companies have learned their seasonality and adjust their spending based on the ebbs and flows of their business. As a business you will need to tailor your marketing to get the biggest bang for your investment and to do that you need to make a big decision. Are you going to put a push in your off peak season or during your core season?
- Trend
- When it comes to seasonal marketing it is important to know the trends so you can make an informed decision about when to push your message. To help with that, Google has a great tool...it's called Google Trends. I know...really out of the box thinking on the name. Below is a view of party rental keywords. This is showing volume of searches on Google for three keywords.
- Planning
- With your marketing message make sure that you are turning up and turning down your frequency. I recommend that during your off peak time that you pull back a little but still keep a strong presence on the Search Engines. Then leading up to your peak time, push your message in all areas to ramp up your client acquisition. Learn more about Seasonal Marketing.
In summary, have a plan and execute the plan. Make sure you are being fiscally responsible and holding true to what your goals are. Make sure the goals are clear and that you have a path is set forth. When implementing your marketing, you will want to re-evaluate the performance and return on the investment every couple of months. Do not set it and forget it. Successful businesses are engaged with their marketing message and their marketing budget.
For more information or to set up your digital marketing plan, email Eric Laylon. You can also visit www.EricLaylon.com.
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