Whilst the general rule of thumb recommended by marketing agencies is that small businesses should spend anywhere between 7-8% of their gross revenue on their marketing spend, the reality is that there really is no clear-cut answer and that many factors will influence the amount you choose to allocate for your marketing budget. It is important to note that the amount you choose to allocate will be unique to your business. What to consider?
GrowthBox partner Angie from Halo Effect Marketing suggests getting inside your ideal customers’ heads and digging deeper to understand the types of social content they consume and the platforms they are most likely to hang out on. This will help with finding - and better reaching - your target audience.
When considering how much you want to allocate for your marketing budget, Ketchup Marketing advise that you should first calculate your expected return on investment, or ROI. In order to get an objective picture on the demand for your product or service, this will involve identifying some robust marketing data that can provide you with a reasonable estimate on what you can expect from your marketing activities. If you are unable to get hold of any suitable data, Ketchup Marketing suggests analysing your market to get a broader sense of your product demand or approaching a marketing agency to see if they could gather relevant insights for you.
A sales funnel essentially describes the stages many customers will pass through on the way to making a purchase from most businesses. It is widest at the start of the funnel (‘awareness’) and narrows at the bottom; that is, at the ‘sale’.
Ketchup Marketing suggests looking at the sales funnel as a tried-and-true method to consolidate your marketing budget. The funnel can be split into four distinct categories: awareness, interest, decision and action. By understanding the flow from category to category, you can efficiently allocate specific funds to each step of your marketing plan.
Awareness: How do you make potential customers aware of your product, service and company?
Interest: How do you generate interest among your customers so that they start looking for your product/service?
Decision: At this stage of the funnel, your customer will know more about your company and will start comparing your pricing/packaging options with that of your competition before making a purchase decision.
Action: The most essential part of the journey is closing the sale. But how do you get a customer to choose you over one of your competitors? At this final stage of the funnel, Halo Effect Marketing suggests that it is worth considering what you are currently doing in each of the above areas and where you could improve. Angie also emphasises the importance of knowing your conversion rates at every stage. For instance, if you are getting a lot of customer enquiries but have low conversion to sale, it is better to concentrate your efforts on increasing your conversion rates rather than generating more enquiries.
Lyfe Marketing cautions that this is where you need to be more specific than simply thinking ‘sales’. Instead, they advise asking yourself how much in sales you can allocate towards your marketing budget and what approach you are going to use to get there, whether that be via social media marketing, SEO or Google Ads. In other words, work out what it is you are trying to accomplish and then decide on the marketing channels you are going to use.
To help make sure you make most of every pound you invest, Lyfe Marketing advise setting both immediate and long-term goals to ensure you have a specific action plan in place. Their advice is to lay out the various steps you need to take, mapping out everything you need to do to achieve the ‘smaller’ goals listed in the previous step that will help you reach your end-goal.
According to Underpin Marketing, the main difference between an agency and a consultant is that as an agency sells marketing packages upfront, they are more likely to push you in the area they are more specialised in, rather than the one which will actually benefit your business. The job of a marketing consultant, by contrast, is to assist companies with creating their marketing strategies. As they are not involved with the actual implementation of your marketing, they will, therefore, be more likely to recommend what your business actually needs.
Unlike a consultant who typically tends to be just one person, an agency will have a larger team to work on your campaign. As with most things, whether a consultant or a marketing agency is better boils down to what it is you are looking for. Advice from Nitrous Effect is that if it is a comprehensive 'one-stop-shop' you are seeking, an agency is probably better equipped to deliver your needs. However, if you choose to work with a consultant, it is important to first ensure you have the internal resources to deliver their strategy in-house.
According to Kaitlyn Partington from Paradigm, when deciding between hiring a marketing agency vs a marketing consultant, there is a misconception that a marketing consultant is the most cost-effective option. One main benefit of hiring a consultant is that, as they are individuals, they are more likely to have cheaper rates compared to an agency; but if they have a great deal of expertise in a particular area, they may nonetheless come with high rates. Depending on their level of experience and qualifications, they may charge as high as £250 per hour.
But it is important to bear in mind that, as they specialise in strategy and not implementation, you will need to ensure you have the resources to devise a plan to implement a strategy they create (or, of course, GrowthBox can help with that too!).
Whichever option you choose, however, they are both still likely to be more affordable than structuring your own in-house marketing team. The takehome is that an agency will cost more than a consultant; but they will come equipped with larger teams and the capabilities and software needed to offer full service marketing.
We hope this has provided a useful starting point to setting a marketing budget and related considerations. For more helpful advice, visit our Advice section at GrowthBox.
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