|How Much Should You Budget for Marketing?
It always amazes me when I read or hear about other marketing experts who advise clients to budget marketing based on a straight percentage of projected sales, like 5% – it’s a lazy answer used by poorly trained marketers who can’t (or don’t want to) calculate return on investment (ROI) for the programs they deliver. Sure, you have to start somewhere, and a basic percent of sales is a sensible starting point, but that’s ONLY the beginning of the conversation, and to leave it at that is to leave out the most important part.
Your marketing budget should provide you with the ultimate leverage for growing your business. What we mean by leverage is that increase in sales achieved for every dollar invested (yes, you should be able to measure this, and any “expert” advising you on how to spend your marketing dollars that can’t set you up to do this isn’t worth a dime of your precious cash). For example, if you have a specific treatment option like McKenzie that you advertise in the paper at a cost of $1,500, and it produces three new patients AND one new referral relationship, what’s the ROI on that? If the average course of treatment is $850, and the new referral relationship is worth $30,000 annually, then that single ad provided quite a bit of leverage for your business:
If running that ad again meant that you would need to go over the “5%” of revenue recommended by the lazy consultant, would you do it? Assuming you could handle the new business, OF COURSE.
To pull this off, here are three steps to follow:
So, if you currently budget based on a straight percent of revenue, it may be time to reassess your strategy – the results can be extremely satisfying.
For more information on Fortune 500-style marketing on a small business budget, please visit www.PTreferralMachine.com.