Think twice before cutting your marketing budget in a tough economic environment

By Sarah Brownlee

Posted on 11th September 2019

Reading time: 4 minutes

As we continue to struggle through tough economic times in South Africa, it’s no surprise that the first budgets to be cut in business are those allocated to marketing.

Although no surprise – we do not agree, and as strategic marketing partners urge business owners to rethink this strategy. Instead of asking how much to cut your marketing budget by, ask yourself how much should your business allocate to marketing?

Well-known American entrepreneur and marketing thought leader, Seth Godin, explains: “If you are marketing from a fairly static annual budget, you’re viewing marketing as an expense. Good marketers realise that it is an investment.”

At a time when more than half the South African population is actively looking for information online, it’s never been more important for your brand to stand out from the crowd in the digital space.

It’s tricky to find relevant local statistics, so we’ve taken a look at the suggested spend guidelines from Chicago based marketing specialists Nuphoriq, to suggest how much we believe small to medium sized South African business should be allocating to their marketing needs.

So how much should you be spending?

According to Nuphoriq, your marketing budget – which includes marketing, advertising, public relations, promotions and any ‘marketing’ related events – should be about 5% of your sales revenue. (Keep in mind that the 5% is not a static percentage and will have to change from year to year, depending on your business needs.)

This is relatively conservative considering that U.S. Small Business Administration recommends spending up 7 – 8% of your gross revenue for marketing and advertising, if your revenue is less than US$5 million and your net profit margin is in the 10 – 12% range.

It’s also important to note that start-ups and new businesses will need to allocate 12 – 20% to launch their brand in the public sphere.

So the bottom line is that the sweet spot is somewhere between 5 – 20% of revenue – depending on the stage of your business journey, your profit margin, and how aggressive your growth targets are.

The basic marketing foundation for any business includes:

  • Branding
  • Marketing strategy
  • Website design and development

Each of these elements is a core focus of our service offering here at Yellow Door – so check out our portfolio section to see examp­­­les of our recent work.

With your website being the first touch point for your brand, it is essential your site is up to date and correctly reflects your brands objective – this is in terms of best design practices, technical maintenance and software updates, as well as general web trends. With online trends continuously evolving, your website should be updated every 2 to 3 years – and these years will require more than the suggested 5% in order to execute effectively. We also try to practice what we preach, so have recently revamped our own WordPress website – check it out and let us know what you think: yellowdoorcollective.com.

So, this begs the next question…

How should you allocate your marketing budget?

Step 1: Set marketing goals

In order to allocate your budget effectively, you will need to identify your goals. We suggest selecting two or three key goals with predefined success measures so that you can evaluate your marketing efforts performance post implementation.

Common ones include:

  • Increase targeted leads to the website – measured by success of digital marketing and Google Ads campaigns
  • Increased conversions – measured by number of enquiries/ subscriptions
  • Increase online sales – measured by sales revenue

Step 2: Check your marketing foundation

In order to reach your goals your need to have a solid marketing foundation.

Check your brand, website, communication pieces and reporting systems to ensure:

  • You have a clear, up-to-date brand that properly represents your company and consistently generates the same brand image for consumers
  • Your brand has a consistent look and feel across all marketing platforms
  • Your website is a cut above competitors in your area
  • You have the correct tools and systems in place to measure the success of your marketing investment
  • You have a solid strategy for business development and marketing related to it.

Note: any weaknesses identified in this step need to be addressed before allocating spend – as it is more than likely that extra funding will be required to address these weaknesses.

Step 3: Spend

With a sound marketing foundation, goals set and success measures in place, you can then begin to allocate your marketing budget.

A brand’s needs will differ from month to month, and depending on their objectives, but here is a rough idea to use as a starting point to allocate your budget:

If you’re in need of a website upgrade, a revised marketing strategy or just need advice on how to launch your brand online then pop us a mail on hello@theyellowdoor.co.za and let’s chat.

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