In general, small businesses allocate 7% to 12% of their gross revenues to marketing. This compares with the Small Business Administration’s suggestion of spending 7% to 8% on marketing. Of that amount, the total budgeted to digital marketing is expected to rise to 45% in 2020 compared to 42% in 2019. The biggest share of digital marketing expenditures will go to video marketing, and social media ads will account for 25% of the average digital marketing budget. Let’s dig a little deeper to see how you should spend your marketing dollars.
Calculating Your Marketing Budget
It’s not too hard, just follow these steps:
- Identify your gross revenue: This is revenue before any expenses, deductions, or allowances. If you are a new business or the market has changed, you can use estimated revenues.
- Determine your ideal marketing budget: If your company is younger than five years old, your budget should be in the 12% to 20% range. You need to spend a high amount to help establish name recognition. Older companies should budget between 6% and 12% unless you are establishing a new brand name.
For example, assume your business is a startup and you expect to gross $100,000 in the first year. With a budget between 12% and 20%, your marketing expenditures should range from $12,000 and $20,000.
On the other hand, let’s say your company is 10 years old and grosses $1 million annually. With a budget of 6% to 12%, you should expect to spend between $60,000 and $120,000 this year on marketing.
Allocating Your Budgeted Funds
To know how to allocate your 2020 marketing budget across online and offline channels, you should review what worked in 2019. To start, identify the 5 to 10 most successful 2019 marketing strategies in terms of leads and sales. Break down the information to categorize your previous-year marketing spending, including:
- Public relations
- Print ads
- Social media
The quality of your marketing data will help determine how much value you can extract from this exercise. To the extent possible, you want to spend money on the strategies with the highest marketing return on investment (ROI).
Understand 2020 Digital Marketing Trends
As you ponder your marketing expenditures, consider these trends:
- More than 90% of customers claim to rely on influencers to help them decide on purchases. In other words, it makes sense to allocate money for influencer fees.
- You really can’t afford to ignore video because it gets results. You can create streaming or live video for a modest cost. Check your community resources for companies that can handle video for you.
- Sophistication is on the rise. Look for increased use of artificial intelligence, video search, and 5G networks.
- You can better convert website visitors to leads by making your site more interactive. Think about adding live chat, quizzes, games, and even virtual reality.
- Do you understand micro-moments? These are instances where folks reflexively utilize their device(s) to do, watch, discover, buy, or learn something. In a micro-moment, people are ready to decide and/or spend money. For you, this means helping visitors act on their micro-moment. You do this by providing value, including timely articles, links to valuable resources, tools, help desks, etc., on websites and apps.
- Be aware that smartphones may eclipse websites this year in terms of video-based advertising.
- Concentrate your marketing on social media sites most relevant to your potential customers, be it Snapchat, Instagram, Twitter, Facebook, YouTube, etc.
- Never forget that content is king. That means you should allocate sufficient budget to pay for high-quality, authoritative, and timely articles employing SEO features to drive an organic presence in search results.
How IOU Financial Can Help
Frequently, a mismatch develops between revenue collection and marketing expenditures. In other words, you may need to borrow money to exercise a timely marketing strategy. IOU Financial can provide quick, hassle-free funding so that you can realize your marketing objectives on your timetable. Contact us today for more information.