When I talk to groups or post on forums I often get asked about setting marketing budgets. When I give the standard info (one should set a budget of around 10% of desired billings) often the response is “I can’t afford that!”
Actually, you can’t afford not to do that. The equation is pretty simple, little marketing = little business.
Recently, John Backman of Backman Writing & Communications shared something he read in The Marketing Report (a subscription newsletter): an article discussing how companies often cut marketing budgets when business slows, in an attempt to save money, and how this is not a good strategy. The writers of the Report (the Marketing Science Institute) found data that seriously suggest cutting your marketing budget is not only NOT effective, it’s a bad thing to do for your business.
It seems that their data show that companies that made the short-term move to reduce marketing spending underperformed their peers significantly in the first year and, over the longer term, the negative impact only got worse. In other words, that money you don’t spend on marketing today could equal over 40% lower sales (when compared to your peers) in 5 years. Ouch!
Now, I’m not suggesting that a business doesn’t have to watch its spending–it does. But not every dollar is equal in its effect. It would be better to put off buying a new Mac or not upgrading to a bigger studio or even changing your insurance to something with a higher deductible rather than cutting into your marketing funds.
I want you to be successful. Making good budget choices will help you on that path.