26 Jul Setting Your Marketing Budget
You know you have to spend money on marketing to grow your business, but it’s hard to determine how much, and it’s even harder to decide what counts as marketing for an independent craft business. We want to help you set the parameters of your marketing budget and determine which of your business’ overhead expenses should be charged to it. Accounting for all aspects of marketing makes it easier to follow a percentage guideline as you allocate your marketing resources.
Marketing vs. Advertising
It’s an easy trap to think of marketing as advertising and think that you have it covered with Google Adwords. In days gone by, you might have considered a print ad in a specialty publication or even just a classified listing; craft businesses were unlikely to find heritage media like newspapers, radio or televison useful, but special-interest and trade publications had their place in the past and are still worth considering today.
The contemporary media landscape has all kinds of opportunities for marketing, even if it’s not advertising in the traditional sense. Engaging in any of these activities should count toward your marketing budget, especially if you’ve been accounting for them elsewhere in your business expenses:
- Sending products to bloggers, podcasters, or other media venues for review
- Providing designers with “free” products for their designs
- Creating and producing your own audio or video podcasts
- Placing your products in swag bags at retreats/conferences/industry events
- Sponsoring programs, podcasts, webinars or other industry-specific media productions
Social media engagement also counts as marketing. Posting on Facebook, Instagram, and Pinterest keeps your customers interacting with your brand. Starting a craft-along thread on your website or your group on the social media platforms of your choice is a form of marketing–perhaps you paid a designer to create a project with your products, but you create the community space for customers to participate. It’s the online equivalent of a promotional event.
All of the platforms offer paid ways to boost your posts in what we think of as the new traditional advertising, as well. With the proliferation of craft-specific social media platforms, you can reach a narrow segment of your targeted audience using only a small part of your marketing budget. Think strategic placement rather than general engagement – for example, in which discussion boards you’d like your banner ad to appear on Ravelry. If you’re selling hand-dyed sock yarn, having it appear on a sock-related discussion board is more relevant than buying space on a board devoted to bulky knits, but lace or shawl knitting might be relevant as well.
Now that we’ve expanded your thinking about what constitutes a marketing cost, it’s time to figure out how much you should be spending on this part of your business.
How Much to Spend on Marketing
You can find all kinds of advice all over the internet about what to spend on marketing. It varies depending on the age of your business and the growth goals you have for it. A startup trying to break into the field is going to be spending at the higher end of the range, where a recognized company with an established marketing campaign is going to be at the lower end, tweaking things to reach new customers and extend their market share. The low end is around 6% of your revenue or expected revenue, while the high end is as much as 20%. The Small Business Administration recommends that companies with gross revenues under $5 million should be spending 7-8%, but B2B companies usually spend less than B2C companies. If you’re doing both, the answer gets trickier, but 10% is a number you hear pretty often.
A popular model for budgeting advises the entrepreneur to think of allocating resources in terms of “buckets.” Across your business expenses, marketing is one bucket, but within marketing, that budget needs to be broken down into more buckets, many of which you’ve probably not been including in your marketing budget:
- Branding. This includes your logo, color palette, tagline and everything on which you will use them: business cards, letterhead, product labels, website design and social media profiles.
- Website. You need to have an online presence for your customers to find you. Enabling e-commerce kicks it up another level in terms of expense.
- Social media. Not only do you need an active presence on social media, it’s also necessary to analyze how each channel is working for your business so that you can allocate your resources more efficiently.
- Advertising. PPC, sponsored content, targeted print media, direct mail – this is anywhere you pay to put your brand in front of customers’ eyes.
- Content. You’re either creating it yourself or hiring someone else to do it and manage its implementation. Content includes social media posts, blogs, newsletters, podcasts, video instruction and digital or print items like pattern collections or instructional books.
- Events. Having a booth at a trade show or the marketplace at a craft event requires organization memberships, display equipment, and travel costs, all of which can be charged to your marketing budget.
- Collaboration. Working with other professionals in the industry to use your products brings them to a new audience.
- Donation. Offering product or financial support to charity groups and events can raise awareness of your brand locally, regionally or nationally.
Once you realize that all of these activities are part of promoting your brand, it gets easier to accept the idea of spending 10% of your revenue on marketing.
Analyze and Tweak
Some of the buckets outlined above are one-time or very sporadic costs. You can pay for a complete branding design and use it for a number of years, freshening it as needed, but that initial cost is not going to be an annual expense. On the other hand, advertising, creating content, having a presence at industry events and developing relationships across the industry will be ongoing expenses as you seek to enter new markets and reach new customers.
You can control how much you’re spending on each of these and reallocate your resources based on your analysis of their effectiveness. Start small and narrow and build from there. Cross-promote on different platforms with the same message and see which gets the best response. Once you know where your audience is finding you, you can diversify the messages to extend your reach. You don’t have to fill every bucket every day, and you can pour from one bucket to another to make it work for you.
If you’re ready to ramp up your company’s marketing, contact Leanne to learn how our services can make magic for your brand