The truth of the matter is that your business will never survive without some type of marketing. Word of mouth marketing is not enough anymore to support your business. Simple posts to social media and meager ads in community newspapers won't support your overhead, or even put food on your table.
According to the U.S. Small Business Administration, you should allocate 7-8 percent of your revenue to marketing. Your marketing budget should never be based on what's left over after you pay your expenses. That approach will surely dig your financial grave.
Why The Slow Recovery?
Having the budget set aside for marketing is one thing, but spending it wisely is completely different. If you've been in business for a long time, then you probably remember what types of advertising would bring people to your store years ago. Sadly those same ads will not work today.
Many stores are reporting slow recovery from the recession while others are reporting strong numbers. As I take the pulse from my own customers, it seems like that slow recovery is affecting those who have cut back on their marketing over the last few years, and now they are trying all the same methods they used in the past.
It doesn't matter if you've been in business for 100 years or 1 year, the entire industry needs to rethink how to approach advertisements that correctly target the modern audience.
Building a Funnel
With regard to marketing, many agencies will talk about the process of exposing many people to your ad messages, then slowly building up their interest over time until only a few people finally make a purchase. This process is referred to as a marketing funnel which allows for many people to be filtered down to only the clients that want to buy from you.
The internet allows for some pretty amazing things, the least of which is to reach thousands of potential customers, i.e. the top of your funnel. Typical top of funnel activities include:
* Paid social media advertising
* Continual social media activity
* Content building on your website
* Paid online advertising
Using one of these methods, without the others, might not work best for you. However, you have to be careful with how much money you spend on these top of funnel activities. Plan your marketing so you reach the largest audience for the smallest cost.
The trick is to get people to your website so you can add them to the next level of your marketing funnel.
Assuming the first level of your marketing is a broad ad campaign, the next level would then be the process of AdWords Remarketing and Facebook Retargeting to everyone who clicked on your website.
Those who see your ads regularly, and strategically, are more likely to respond. You might get them in your store to buy, but the hope is that you will at least get them to create an account, a wish list, or ask a question through your website contact form. Those three activities would then allow you to put them on an email marketing list.
Building an email list will take time since only a small fraction of those who enter your funnel at the top will make it all the way down to the bottom of the funnel. Email marketing won't ever die so make sure it's part of your overall marketing plan.
There's a real cost involved with implementing your marketing funnel. Sadly, most people look at the costs backwards.
The most valuable asset we all have is time. I volunteer a few hours of my time with SCORE every week to work with start-up businesses in New Jersey. One of the business coaching tools we use at SCORE helps us identify the minimum hourly rate that any entrepreneur should be charging for their service. The typical cost of a single business owner working 40 hours per week is at least $50 per hour, usually a lot more.
Using this number we can determine if a business owner is spending their time wisely to bring in new business, or if they are slowly digging their financial grave on other non-cash generating tasks.
Top of funnel advertising doesn't generate cash, but email marketing does. However, top of funnel marketing usually has a specific cost for the media buy, whereas most people tell me that "email marketing is just them spending their time."
Most business owners are already too busy to allocate their time for email marketing. They'd rather spend more money on top of funnel activities in hopes that people will eventually buy.
Some jewelers would consider $400 per month a lot of money to spend on Facebook or Google advertising, and they'd be disappointed when those ads do not generate direct sales. Sadly, their point of view is wrong. That money should be the allocation for the top of funnel introduction of your store to your audience. You shouldn't be spending more than $1 per click on those ads.
The next level is the remarketing phase where you should have a budget that allows for between $6 to $15 per click to re-capture someone's attention and get them back to your website.
Writing an email might take 7 to 10 hours of work. That's a time cost of $500 just for a single email that should only be sent to a segmented part of your list. Those audience segments could be as small as only 10 people. Not everyone can allocate those 10 hours of time to for a small audience, and that's why most people just throw more money into their top of funnel activities.
Plan your marketing so you have a primary method of finding new customers and then add them to your other marketing lists.
That primary method should be able to reach the largest audience at the lowest cost. Continue marketing to your audience through a series of more accurately targeted ads. Your costs will increase as your more accurate the target your prospective customers.
Don't forget that time is your most expensive asset.