How much should you spend on marketing?

September 15, 2011

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How much should you spend on marketing?

I know I need to do some marketing but how much should I spend?  How much do other companies my size spend?

This is probably one of the most asked questions of marketing agencies and consultants.  If you google the phrase, there are 17+ million results.  And yet, we keep asking.  So let me see if I can drill down to the heart of it.

One of the reasons why it’s on everyone’s mind is because there is no magic answer.  No one solution.

Before we get into the methods of determining a right answer, let’s be very clear about these two points:

1) The exact amount matters less than having an amount.  In other words, having and tracking a marketing budget, even if your initial number is off, is much more important than getting the number exactly right.

2) You can have the right budget and spend it on the wrong things.  A marketing plan should always be tied to a strategic marketing budget.

Now, let’s tackle the question.  Here are some of the more effective ways to set a marketing budget:

Percentage of gross sales/revenue:

This is probably the simplest method.  Most experts recommend somewhere in the range of 2-8% of gross sales.  McKinsey & Company is often quoted at 5%.

Most small businesses (less than $5 million gross revenue) should shoot for at least 7-8%.

Industry-specific:

Many industries have their own standard.  For example:

  • Consumer package goods:  Up to 50% of projected net sales to launch a new product
  • Industrial B-to-B:  1% of gross sales
  • Retail:  4-10% of net revenues
  • Banks/Credit Unions:  2-5% of assets
  • Law firms:  1-4% of gross revenues
  • Pharmaceuticals:  Up to 20% of net sales
  • Hospitals:  1% of net revenues

Lifetime value of customer:

The idea is simple. You identify how much profit (on average) you make during the lifetime of that customer relationship and determine how much you are willing to invest per customer acquisition.  If you choose this method be very careful that your numbers are accurate.

Goals/Plan driven:

The thinking behind this method is really a blend of some of the others.  Identify measurable goals (# of new clients, % of revenue increase, etc) and then determine your sales equation.

For example:  For every 100 prospects approached, you get 25 initial meetings.  From those 25 meetings, you can expect to get 12 invitations to present a proposal.  From 12 proposals, you will score 4 new clients.  If your goal is 20 new clients, you now know that you need to approach 500 qualified prospects.  You build your marketing plan to accomplish that and assign the costs accordingly.

Again, this method requires very accurate numbers to make the equations viable.

So what do you think?  Which method do you currently use?  If you don’t have a marketing budget, which method do you think would serve you best?

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Brilliant writing is timeless

September 7, 2011

Two months into launching my blog in 2006, I stumbled upon this example of copywriting brilliance and shared it with my readers.  Back then, my readers consisted of my parents and about 2 other kind souls who took pity on the newbie blogger.

I was going through some old posts for a project I’m working on and discovered it again.  Now that I have a whole handful of readers, I thought I’d share it again.

As you experience the copy, think about how it must have evolved.  The time it took.  The precision of the language.  This kind of work doesn’t happen when you’re rushed or not really thinking about the end game — what do I want my audience to feel/realize at the end?

There’s a twist to this…so stick with it until the end.  It’s worth it.

Enjoy.

 

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With all due respect, what are you waiting for?

September 4, 2011

makethingshappen
…what are you waiting for?

I’m all for having a plan when it comes to marketing.  To just start flailing around is usually a waste of money and opportunity.  But for many businesses, the need for a plan and the “right” time is just an excuse to do absolutely nothing.

I’m also absolutely positive that there is one marketing tactic that you KNOW you should be doing but for some reason you haven’t started it yet.

Maybe you don’t have the perfect name for your newsletter.  Perhaps you aren’t sure if you have the stamina to blog.  Or something might happen in the 4th quarter that would negate the momentum of the initiative (translation = you’re scared).

Just start.  Don’t put it off for another minute.

You are letting your head get in the way of your marketing gut.  Maybe you can’t explain why you know it’s the right choice or you have never done it before so you’re worried you’ll do it wrong — whatever is stopping you —  get out of your own way.

Call it a pilot program or a test run.  In your own head, make it sound like it’s no big deal.  However you have to psych yourself out/up — do it.

Marketing is an every day thing.  Not a special day thing.  It’s not the Thanksgiving china — it’s the Corelle dishes you use on Mondays (and Tuesdays…).  So get over yourself and just make this happen.

How can you actually get this done?

  1. Starting right now — create a list of what you need to have/do to launch.
  2. Set a date.  A firm date that you’re not going to miss.
  3. Tell someone (your team, your boss, your customers) that you’re going to do it and when (i.e. We’re launching our company Facebook fan page on Oct 1!)
  4. Create a reward for yourself/team to celebrate the launch (it can be as simple as ice cream cones to as big as a day off)
  5. Start chipping away at the list.  Now.  Today.

You have 4 months left in 2011.  There’s always going to be a reason not to start.  Isn’t it time that you just did it anyway?

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THE best customer service tip ever

August 31, 2011

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… stellar customer service = pinky swearing

I’m going to tell you THE secret to incredible customer service, customer retention and word of mouth referrals.

It’s quite complicated so you’ll want to print off this post and hang it somewhere where you can refer to it every day.

If you’ve got music playing or some other distraction around you — turn it off/put it away so you can fully concentrate on the concept I am about to unveil before your very eyes.

Ready?

Pinky Swear.

When we were kids, if you pinky swore — that was a blood oath, a die or do it sort of thing.  There were no asterisks, exceptions, small type or exclusions.  It was a pinky swear. Enough said.

If you want your customers to rave about you and to come back time and time again — pinky swear.

If you are so old that you don’t remember pinky swearing — let me translate it for you.

Do what you say you’re going to do.  Every time.  No exceptions.

Go forth….and pinky swear.  Your customers will love you for it.

 

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Marketing tip #83: You really can’t make the horse drink

August 26, 2011

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You can’t make a customer buy!

Here’s an uncomfortable marketing truth:  With few exceptions, you cannot control potential buyers.

No matter how great your product, how spectacular your price or how unparalleled your customer service reputation — if they aren’t ready to buy, they just are not ready to buy.

Yes, as the old adage says — you can lead them to the water.  But once you get them there, you only have two choices.  Try to force their head into the water or entice them to hang out by the water trough until they’re actually thirsty.

And trust me, if you’ve spent any time around horses or a stubborn prospect, you know that you cannot force their head into the water.  No matter how badly you’d like to!

Sadly, to stay with the analogy — most companies don’t have any carrots or sugar cubes at the ready.   Which means their “horse” wanders away.  And by the time they’re ready to buy — probably has wandered to someone else’s watering trough.

I see so many companies that can get a prospect in the door but if they don’t buy that instant, have no way of staying in touch, creating a relationship or keeping under the prospect’s nose until it’s the right time for them to buy.

Imagine this scenario: Someone who would be the perfect sweet spot customer called today and chatted with you on the phone for 15 minutes but wasn’t ready to buy — what would you do/say to keep them connected to you until they were ready to buy?

Could you hold their interest for a month?  6 months?  3 years?

If you didn’t have an answer or don’t think you could keep them around the water trough for as long as you need — you are letting sales walk out your door.

So…now what?

 

 

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Your customers are afraid to spend

August 23, 2011

sandacastlewaves
…Customers are afraid of the coming tides

Building a sandcastle (with our without the pre-form buckets) is a childhood ritual that brings with it a sobering life lesson.

Unless you are uber cautious about location — the tide is going to come in and wipe out that sandcastle sooner or later.  And if the tide doesn’t get it, beach walkers, dogs or 4 wheelers will do the job.

Young or old, there’s something haunting about watching the waves creep up on your masterpiece, knowing you can’t alter its fate.

I think that’s exactly how our customers are feeling today.  They’re leery of investing too deeply or buying into new long-term programs because they have this nagging fear that the waves are heading back in.

The world economy’s continuing struggle, the US debt ceiling debacle and credit rating slap on the wrist and in general, a sense that it’s tougher to make a buck these days does not bode well for us as marketers.

How do we function in an environment of nervous trepidation?

Acknowledge it: Don’t hide from it.  Don’t pretend it isn’t there.  Be up front about it.  Recognize that your sales cycles are going to be longer.  Build your projections accordingly.  The only way to weather the storm is to be well prepared for it.

Make the most of it: If your customers are less likely to sign long term agreements or are going to want to stretch out their payments — price accordingly.   Create a new, shorter term choice but price it at a premium.  That’s not taking advantage — that’s upselling.

Don’t cut your prices: This is one of the biggest mistakes business people make during tough economic times.  It may make short term sense but it’s a killer long term.  If you reduce your prices — you will never be able to raise them back to where they belong again.

Manage your costs by managing your customers: Not all customers are created equal.  Customers who are not a good fit, demand too much of your time and don’t reward you with their dollars in equal measure are actually draining your company’s resources. Perhaps it’s time to fire some of them?

Re-think your business model: It may be that how/what you’ve sold in the past simply isn’t going to work in 2011 and beyond.  Just because you want to sell it doesn’t mean there’s still a market for it.  Or maybe it needs to be re-packaged or re-tooled.  If you were starting a new business from scratch in your industry — what would it look like?  Should you move in that direction?

You can’t work in marketing or own a business for very long without running into shifts in the economy.  And we’re not going to love every shift.  So you have to be willing and ready to adapt.

How are you/have you accommodated this current economic climate?

 

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Content marketing playbook

August 22, 2011

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...get a playbook to help you create content that matters

The idea of creating content to establish your expertise, influence the search engines and create a community has been an evolution of one of the oldest marketing tactics out there — sampling.

If I share with you what I know and you learn from it, value it, want more — then in theory, you’ll eventually move from the sample table to the real deal and hire me to give you the full benefit of my expertise.

In the good old days, we might have done that through demonstrations, speaking at conferences or printed newsletters.  (All still viable methods, by the way).

But today — we have lots of new avenues, thanks to digital media and our ability to produce and publish content in a much wider variety of ways.

Every year or so, the Content Marketing Institute (brainchild of Joe Pulizzi) puts out a very informative ebook that outlines some of the best and most effective ways to create content that will connect you with customers.

The best thing about this ebook is that it’s loaded with examples that you can study, learn from and of course, adapt to work in your marketplace.

The 2011 version is out and you can download it absolutely free by clicking right here.

 

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Are Smart Phone cameras your new marketing partner?

August 18, 2011

 

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Are you leveraging your clients’ technology?

The smart phone is literally changing our world, bit by bit.  It’s changing how we accomplish everyday tasks, how we get our work done and how we communicate with/to the world.

Let me give you an example.

Fact:  Mobile devices have replaced cameras for 44% of consumers

How does that impact your business?  Every day, the majority of your customers are walking around with a camera in their pocket.   How have you adjusted your marketing/thinking to take advantage of that?

Odds are, your answer is… I haven’t.  Begin by asking yourself these questions:

Can I integrate photography/photos into my core offerings?

Example:  EBay has now added the functionality of being able to scan a bar code and click a photo (all with a smart phone) and with two quick uploads, your sales listing is complete.

Is there something you could add (customers text you photos of their car accident from the scene, clients inventory stock for their quarterly financials with some photos, etc.) to how you support clients that their phones could make easier, faster, cheaper?

Do my policies need to be updated?

Example:  It used to be that bridal shops wouldn’t let you bring a camera into their store, for fear you’d steal the design and run home and make it yourself.  Now… anyone can snap photos in the dressing room without lugging in a camera.

Maybe the bridal shops should have you text them photos (from magazines or wherever) of dresses you like so they can pull similar dresses for you to try on, when you arrive at their store?

Do you have policies and procedures that smart phones make obsolete or worse — silly?

How can I get my best customers to share photos that tie to my work?

Example:  There’s a production studio here in my community that in the good old days, used to snap poloroids of the people in studio and then display them all over their walls.  Today’s modern version of that should be — they grab a quick digital shot on their phone… and upload it to their Facebook fan page, tagging the people in the photo.

Now… not only will their fans see the pictures, but so will the Facebook network of each person in the photo.  How can you leverage your customers’ love for sharing, their smart phone and their network?

What other questions, in terms of the smart phone’s ability to capture photos, should we be asking ourselves?

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You need a smaller net

August 15, 2011

 

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…are you fishing with too big a net?

Fear can make us take our eye off the ball and lose focus on what really matters.  In marketing, that often translates to these sorts of mistakes:

  • I’m afraid this is the only ad/website/sales letter they’ll ever see so I need to cram everything I can into it.
  • I’m afraid they’ll choose someone else so I’ll lower our price, even though my price is fair.
  • I’m afraid we won’t have enough customers, so I’ll chase everyone that breathes.

I must admit, I get on my soapbox about this one.  One of the best things about smart branding is that it repels the wrong customers.  People who are not a good fit.

Every business has a “right fit” customer and those are the only people you should be actively pursuing.  Why would you want to win a new customer only to deliver at a so so level.

You can rock the socks off the “right fit” customers.  They’ll brag about you to their friends.  And you’ll love working with them.  Stop being content with anything you can catch in that big net of yours.  Go get a smaller net and chase after just the right fits.

Need more convincing?  I got this note on Facebook the other day from Sherry Borzo, a business woman I know here in Des Moines.

“Must tell you, because I’m pretty sure you were the one who said it so often in my presence a few years ago, but I truly GET the idea of working only with your ideal customer. It makes for a much happier environment for both business person and customer. It is like you’re building your own little community. So important. Always think of you saying that when I’m working with a customer that fits well with what I do.”

Amen to that!  Toss that big old net in the garbage and begin catching your right fit customers.

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Are you sure it’s what they want?

August 11, 2011

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…Give your customer choices they actually care about

One of the buzzwords that continues to bounce around the marketing world is “value add.”  I have no issue with providing more value to your customers.  In fact, I think it’s a dandy idea.  But I think you can also stub your toe when you do it in a vacuum.

As you know, I fly a lot (visiting clients, speaking at conferences, etc) and I always fly United.  Like most of you who travel a fair amount, I have traded choice of airline for airline perks.

For the most part, I love United and the benefits I get as one of their frequent fliers.  But it also gives me an opportunity to see many a marketing attempt go awry.

What your customers want, in terms of value add, is real value, not value for show.  Let me show you a few examples (at United’s expense):

Real value: The Red Carpet Clubs — very cool spaces with plenty of free wifi, soda, snacks, really comfy chairs and best of all,  customer service reps who  will take as much time as you need to help sort out a messed up ticket or change in plans.  (Value added — comfort and great service)

Value just for show: Unlimited upgrades for their upper tier customers.  Except…. in many cases, they don’t upgrade your companion if you’re flying with someone else.  So really — it’s just mean teasing.  “Oh, we wanted to upgrade you but your kid/spouse/buddy will have to fly coach.”  Who wants to be that jerk?  Which means I only get to use the upgrades I’m offered if I am flying alone. (You’re pretending to give me a value and then taking it away)

Real value: Letting frequent fliers board the plane first, meaning there’s always overhead storage space available.  (Value added — convenience and comfort)

Value just for show: The ridiculous red carpet line (complete with a scrap of red carpet that you have to cross) that only makes the casual traveler feel like they don’t matter and the frequent flier feel conspicuous.  (You’re using me to advertise your perks)

Notice how the real value happens when a company selflessly worries about what matters to their customers.  But the value just for show is when the company decides, without asking their customers or walking a mile in their shoes.  Then the “value add” looks self serving and may actually diminish the experience for your best customers.

So as you contemplate how you can appreciate your customers and reward them for their business — be sure the value add is genuine AND actually valued.

 

 

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