Is the price right?
Houston expert shares her advice on how much startups should spend on marketing
Industry research suggests spending 5 percent to 12 percent of total revenue on an annual marketing budget. At Integrate Agency, we believe marketing spend should be determined from key data points, versus current size. We shepherd our clients through a five-step process to calculate how much they should spend on marketing to maximize their ROI.
1. Know your goals
You can't manage what you can't measure. Before you start spending, you must first set SMART goals. Challenging, but realistic, short-term goals may include:
- Sales/revenue growth
- Customer count
- Consumer ratings improvement
Integrate updated Delmar Systems' website with the goal of increasing traffic that would generate leads. By having a clear goal at the forefront, Integrate created a conversion-focused website and calculated an ROI for the company (including 631.9 percent increase in new visitors and 23.9 percent increase in qualified leads).
Your goals should set a strong baseline of expectations and establish clear guidelines for the budgeting strategies to reach those goals.
2. Know your data
You can only track your goals, and tweak your spend accordingly, if you have the specific data to tell you what's working and what isn't. Some of our favorite tools include:
- Google Analytics for visitors, bounce rate, and time on site
- Site Checker for SEO performance
- Conductor for content efficacy
- Sprout Social for social media metrics
One of our clients wanted to increase its qualified leads, but before we added more dollars to the equation, a full audit of the company's digital efforts uncovered significant spend inefficiencies. The data uncovered a new strategy that led to a full revamp of its PPC campaign. This helped them save $8,000 per month and led to a 63.9 percent year-over-year decrease in cost-per-click cost and 42.3 percent year-over-year increase in click through rate.
3. Know your audience
If you have a strong concept of your customer base, you'll know where, when, and how you can best connect with them.
To this end, we are hyper-aware of our clients' seasonality and when their audience is most likely to buy (and for B2B clients, when budget review season is) so we can target their marketing budget accordingly.
Six Flags Hurricane Harbor Splashtown operates on a seasonal basis, by its very nature. Each summer, Integrate focuses on a concentrated marketing approach and last year garnered over 540 million traditional media impressions in just four months.
This activity has ensured they're top-of-mind when it matters most, versus spending dollars when their customers are not considering this purchase.
4. Know your competition
Regardless of market share, it's important to keep up with what competitors are doing. We recommend beginning your competitor research with:
- SEM Rush for SEO keyword research
- Majestic SEO for linking statistics
- Ahrefs for backlink strategy
- Moz for rank tracking
When Escalante's sought to outmaneuver its competition with digital tactics, Integrate's competitive data revealed that none of its competitors in a specific neighborhood were being overly aggressive online.
By focusing on geo-targeting and ad scheduling to ensure ads displayed to the preferred audience at the right time, the restaurant has been able to capitalize on specific traffic without a large budget.
5. Know your capabilities
A question will often come up about in-house vs. outsourced marketing. In-house gives you maximum control. But, to be most effective with your spend (and often attune to the latest, best-in-class, industry techniques), you must fully commit to your marketing efforts, which an agency, or outside partner, can provide.
As one client — Arthritis Relief Centers — grew, their staff no longer had the time to devote to marketing. By making the decision to work with Integrate, the company had more time to devote to patient care. This led to an over 100 percent increase in clicks to digital ads and a 56 percent decrease in cost-per-click because the client trusted the agency's digital marketing expertise.
The biggest upside to outsourcing your marketing: letting your team focus on servicing customers and improving your products.
As we stated earlier, the experts tell you that your marketing spend should normally live between 5 and 12 percent of your gross revenue, but we believe your marketing budget, and the integrated mix of how that budget is implemented, should be tied to growth needs and goals.
Allie Danziger is the founder and president of Houston-based Integrate Agency, which focuses on digital marketing and public relations.