After reading this article you will learn “how to market your business with ease” if you have a marketing budget in place.
Around 1/3rd of businesses start with only $25,000 in funding, according to research by a financial platform Kabbage. While some of these businesses are lucky and get investment in initial days, but others have to survive on whatever savings their founders have and bootstrap.
One thing that keeps these bootstrapped businesses afloat is having a proper marketing budget and sticking to it throughout until they become profitable.
Forbes puts out a list of reasons for business failure each year. Interestingly, ‘lack of capital’ is one of the major reasons most businesses fail. In its rating, an improper business model and poor marketing stand at 17% and 14% respectively.
Forbes describes the ‘inability to create a profitable business model’ as one of the 10 main reasons why these small businesses don’t become profitable even if they survive. And, a good example of this is Twitter, which became only profitable in 2019 – after 10 years of losing money.
The purpose of this article is to help you – as an online business owner – realize the importance of creating a marketing budget for your business. It will help you prosper and take your business to new heights.
Lack of Experience + Lack of Budgeting = Failure
U.S. Small Business Administration says that many businesses don’t allocate enough money to marketing because they lack experience and don’t have a realistic marketing plan on paper. This leads to cash flow leaks and resultantly these businesses close.
What if they could create a proper marketing plan and budget? A proper plan that can keep these businesses on the right track by providing them a sound but realistic strategy.
A few things to note here are:
- What does the business want to achieve?
- How long will it take to reach the break-even point?
- What type of business you own and who is the customer?
Answering these questions is the key to creating a sound marketing budget plan for business.
Importance of a Marketing Budget Plan
It is important to understand how a marketing budget can help keep your business profitable. The marketing budget must include a budget for marketing, manufacturing, and for day-to-day expenses. Since manufacturing and daily expense budget are essential for its survival, the marketing budget is one that we can optimize.
A well-defined marketing budget will help the business get new customers, improve return on investment (ROI), increase customer lifetime value (CLTV), and invest in research and development (R&D) activities.
Key Points to Note:
- Businesses spend too much on marketing.
- They don’t plan their finances strategically.
- They don’t develop a connection between marketing and sales.
- Most of them don’t even know who their customers are.
Marketing Budget Essentials: What You Should Know?
Do you have a vision for your business? Before we move forward, it is important that you have a clear and concrete vision for your business in place, because that will define its plan for the future.
This is the vision of Cloudways. Simple, succinct, and practical. We help people achieve their dreams by taking away the pains of server management.
Similarly, you need a vision that aligns with the nature of the services you offer. Once you have the vision, define the yearly goal(s) to measure your progress.
Let’s say you are at zero earnings right now. Your goal for the first year is to at least earn $50,000. Now, you can create a strategy to earn this value in the next year.
Ensure that the goal is SMART.
Next, identify your customers. What type of people are more likely to buy your products. Let’s say you are selling mobile phone covers. So, who are more likely to buy your covers and why? For starters, it can be anyone having a mobile phone. But this is too broad. Therefore, narrow down your list to Android smartphones for a start – you can’t cater to all.
Now, these Android users should have an age and a financial condition. Let’s say these are between 18 and 28 year-olds, and they can easily spare $25 for mobile covers.
This type of segmentation is also called a buyer persona as Hubspot has defined it.
Set an Annual Budget
Just like your goal, you must have an annual budget for marketing your business. For example, if your goal is to earn $50,000 in one year as revenue, your marketing budget plan should be $10,000 per year. That is around $800 per month for the first year.
This more or less depends on many variables including the expertise of the founders, market conditions, customer type, and product type.
By having a yearly marketing budget, you will be in a better position to optimize your overall marketing.
Breakdown of Marketing Budget Strategy
Similarly, breakdown your marketing budget into small chunks based on the amount of budget you need for all platforms/channels.
For example, you have an SEO working on link building and website optimization. You need to pay for his salary, and at the same time, you will publish content on your website that the SEO guy can promote. Both these combine to around $500.
Note: We have only listed the efforts of SEO and content writer who work as freelancers. In-house staff will charge a lot more.
Next, you will have to promote your content through paid campaigns. And, these paid campaigns require around $10 per day. So that will be around $300 per day for two campaigns per month, for the first few months. So on and so forth. Optimize your budget accordingly, keeping in focus your starting finances.
Create a USP
Let’s come back to our previous example of mobile phone covers. To sell these covers to the right audience, you must have a unique selling point (USP). The USP can be anything from glowing mobile phone covers to custom-made art. It should differentiate your product from all that is already available in the market. A USP is the only thing that the business can use to market itself in a better way to potential customers.
For Cloudways, the USP is its managed hosting. There are only a few cloud hosting solutions that offer managed hosting. But none of them offers choices of five different infrastructures like Cloudways does.
Similarly, your business should have a USP that you can use for marketing your business. It will not only make your business stand out but also decrease the marketing budget.
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Marketing Channels for Digital Businesses
Online businesses use multiple channels to promote their products across the internet. But that doesn’t mean that new businesses should do the same. Instead, they should market to only a handful of marketing channels. A few marketing channels that are easier to grasp for new founders are:
1. Organic Marketing: Search Engine Optimization
One important way to market online is through search engines. We call it to search engine optimization (SEO) and search engine marketing (SEM). Websites can market their products on search engines by ranking for keywords that have high search volume. But to do that, they will need to have a huge chunk of quality content on their websites. Organic marketing through search engines is effective but it is a time-consuming process.
Budget for SEO
Organic marketing is very much focused on SEO and link building outreach campaigns. The charges for SEO start around $500 per month per website. Meanwhile, the outreach campaign for link building can vary from $0 to $100 per post.
2. Organic Marketing: Social Media Marketing
Another way to market your business organically is through social media marketing. Social media allows users to promote their content on pages/groups and even on their own accounts. Most new businesses have become successful in gaining initial traction through social media. But there is no guarantee that the technique will work for everyone.
In fact, a few ecommerce business experts we have talked to, say that they have a list of hundreds of groups where they promote their content on a daily basis through different accounts. This reduces their chances of being marked as spam and generates plenty of leads. This is also an effective medium if you have a team of social media marketers.
Budget for Social Media
You will need to hire a social media freelancer to schedule posts. The charges for a social media manager include $300 / month or less depending on the type of freelancer you hire. You will also need a social media tool such as Hootsuite. The charges of these tools also vary between $20/month and $50/month.
3. Email Marketing
Email marketing is not an initial activity, but when you start to collect emails you can go ahead with email marketing. It can also yield desirable results for many new digital businesses. On average, the open rate of emails is 25%. Of this 25%, only 12% click on the links available within emails.
When marketing through emails, make sure that you are sending the right type of products to the right type of audience. The best way to find that is through marketing automation. Create different segments of users within your emails and market to them with the right type of products to improve conversions.
Budget for Email Marketing
Email marketing doesn’t require exceptional budgeting as you need for social media and search engines. However, you may require an email marketing and automation software. The charges for the software can be between $50 & $100.
4. Performance Marketing
Performance marketing (also known as paid marketing) is crucial for both startups and established businesses. But businesses can get an edge through paid marketing if they use it smartly. Paid marketing allows business owners to rank for those keywords that are difficult to rank for organically. Of course, the cost per click will be a lot higher, but it will also lead to more conversions for these businesses.
Budget for Performance Marketing
Performance marketing budget can vary from industry to industry. For businesses starting their first campaign, the budget should be low at around $10 per day so that they don’t burn too much money in irrelevant campaigns and can also experiment along the way.
Paid marketer (freelance): $400 or 10% commission on each sale.
Marketing Budget Mistakes to Avoid
Avoid these pitfalls while creating a marketing budget plan if you want to succeed in your business.
1. Bad Data & Assumptions
If you are estimating your marketing budget, make sure you don’t fall into the bad data trap. Marketing is mostly the game of hunches and intuition. But if you have an inaccurate data, you will estimate the wrong value for the budget. Therefore, it is important that you don’t make assumptions while estimating your marketing budget and keep every detail in front. This practice will ensure that your allotted budget doesn’t fell short.
2. Not Connecting Marketing With Sales
The purpose of marketing is to drive sales to your online business. But most of the time, marketers forget the core purpose of their marketing activities and don’t coordinate with sales teams. This leads to a gap in between both the departments and ultimately the company suffers.
While managing the marketing budget plan, make sure to figure out how your activities will translate to sales, or alleviate sales.
3. Using Too Much Budget Too Soon
Most marketers will try to test various marketing activities. They think that by finding new ways of marketing, they will be able to bring more profit to the business. Unfortunately, this doesn’t always happen and during this testing process, they also lose most of the marketing budget. Hence, it is important that you keep a check on the budget and only use it for marketing activities that work.
If you really want to test various marketing activities, then keep around 10% of the marketing budget for research and development (R&D) activities.
Creating a marketing budget is essential for any business that is just starting out. But while planning one, make sure that you follow all the tips outlined in this article to avoid any major mistakes that can become a hurdle for your business.
Experiment, fail and experiment again.
In the end, it is all about trying, as there is no ‘shortcut’ formula to allocate an absolute budget that works for your business. The more you experiment with your marketing budget the better you get at it. If at first, you don’t earn the profit you require for business, then that is alright. Simply keep going and in the next few years, you will reach the breakeven stage only if you don’t give up.