How much should I spend on marketing?

A business owner asked me this week, “How much should I spend on marketing?” Then he asked, “What results should I expect?"

This executive owns a growing technology services company, he has experienced some growth, and wants to drive more. He’s hearing a cacophony of recommendations from marketing people on what he should do and how much he should spend, but he’s not sure how to develop a good plan. Here’s what I advised.

First, I asked his gross sales and margins. He grosses in the mid seven figures and has margins that exceed 20%. That indicates that he can afford to invest in marketing out of his profits rather than out of his operating capital or with borrowed money. That’s a good thing.

Next, I asked if he is under heavy competition (his margins say, “no”) and I asked how badly he wants to grow.

He said that he’s carved out a niche position in geo-location programming where he doesn’t have much competition, but he is challenged to get the word out about how good they are. And, yes, he has a strong desire to keep growing so that someday he can sell the business. That indicates he should spend fairly aggressively.

Lastly, I asked who his ideal customer is and who the decision-maker is at that customer’s business who approves spending on these types of services. He answered that it varies across different customer types- some are government, some are large corporations and some are other technology providers for whom they sub-contract. This points towards a marketing plan that’s closely tied to in-person sales efforts. This is not mass-marketing, its micro-marketing.

So, here’s my recommendation for the first year of his new marketing and sales plan. Allocate 5% of gross sales toward marketing. Give that budget to a marketing and sales manager he hired to spend on the following activities.

- Clarify his brand position into niche verticals by customer type: government, large business, and technology providers.

- Update the company website to reflect these verticals.

- Develop a steady stream of online content touting their industry expertise.

- Exploit networking opportunities through trade associations and get speaking engagements.

- Activate a CRM to track prospects and develop a lead cultivation plan.

- Create a monthly e-newsletter on tech trends.

- Launch a quarterly webinar on tech topics and capture emails.

So, there’s the spending recommendation and the plan. But what about results to expect?

Here are key performance indicators (KPIs) from this campaign to track closely.

· Website traffic- it should increase.

· Average time-per-website- visit. Look for increases as visitors browse new content.

· Increases in e-newsletter subscriptions.

· Interaction levels with content- blog, video, and podcast.

· Number of speaking engagements.

· Numbers of sales prospects.

· Numbers of sales meetings.

· New customers.

Is he going to see an immediate return on investment? It’s likely that won’t happen in the first few months, but all of the trackable KPIs will signal what’s working and what’s not. That way he can adjust the plan to ensure his investment is delivering some results right away.

Plus, he should get at least a few new customers in the near term, which in his business, will go a long way toward paying for the plan.

This post was written by John Walker, Principal at J. Walker Marketing. Contact John directly to discuss your marketing challenges. John@JWalkerMktg.com.