It has diverse benefits. But there are still many small businesses that are not making its best use. The reason behind it could be any; probably they are not aware of its benefits or they are not clear with the budget that they need to invest on it.
Unfortunately, there’s no easy way out, because planning a marketing budget is not a child’s play! However, there are many rules on which it can be planned. But before doing this, every business owner needs to understand the difference between the marketing and advertising.
Advertising is a subset of marketing while marketing covers advertising, brochures, competitions, trade shows, travel, personal selling, free tastings, demonstrations, direct mail, sponsorships, etc.
Here are five thumb rules that will help you to create an effective marketing budget –
Promote at the Right Time
Businesses with no budget and declined sales often make the mistake of promoting their brand because they need extra business.
It does no good to the business; instead, it is just a waste of money. Thus, it is always advisable to advertise at the right time.
This is because the only objective should not be fixing a problem, but instead, creating new opportunities as well.
Don’t Depend on the Spare Cash
Businesses that are doing well are likely to spend more on promotion while businesses doing not so well are likely to cut down their efforts. But this is not the correct way to utilize the cash flow. The simple reason for this is that if a business falls, the promoting of will also decline, which in turn, will eventually affect the business more.
Don’t Completely Rely on the Percentage of Sales Method
The percentage of sales method is the most appropriate way to determine what percent of business sales profit will be used for the promoting the brand. For example, if the sales were $300,000 and you decided to spend 5% of sales on promotion, then the total budget will be of $15,000.
But the question arises if actually there is a need for spending $15,000 for promoting. Well, to it is NO! If it can be done for a lesser amount then why spend more?
Therefore, the percentage of money used for promotion should be based on the need of a business. For example, a retailer needs to spend more on advertising, while a manufacturer need not spend amount of money as the retailer.
Never Follow the Competitors
According to business accountants of development service companies most of the businesses often copy their competitors to promote their brand’s product or service. But this approach may not be so helpful as the competitors may have enough budget or good sales, which allow them to spend thousands of dollars in promoting themselves.
Thus, copying the competitor is a bad idea. Therefore, it is advisable to make your own strategy that will help you jump one step ahead of the competitor.
Plan Your Strategies Beforehand
Before implementing anything, planning is always important, especially for entrepreneurs. Right at the start of the year, targets should be set for the next 12 months.
This covers the targeted customers, in which you want to popularize your and the total cost of expenses. Adding all these costs beforehand will help you to prepare a marketing budget for the year.
Points to remember while making the budget –
- Hold a cash reserve, so that you can make the best use of it at the right time (at times when profitable opportunities arise during the year)
- Keep your objectives clear.
- Use money for business promotion at the right point of time.
- Conduct a break-even analysis. This will help you determine whether you are able to get enough profits to cover the amount of money spend on promotion.
- Implement strategies that you know will work out best for your business. Moreover, never do things which your competitor is doing because every business is not the same in terms of cash flow, budget, sales and more.
- Spending money on promotion to keep relationship with the existing customers and to maintain market share is a good thing. But, make sure it is working in your favor.
In addition to the above-mentioned points, there is one more thing that you should consider – regular monitoring of the marketing process. This will help you to determine whether or not it is providing you with beneficial results. Negligence towards it will do nothing good for your business; instead, will just waste your money.