We have often been asked about how to budget for projects. But before you ask a marketing firm to give you a budget it is a good practice to first think through your goals, and your existing market place. It is rare, though not unheard of for companies to launch with just luck. But as the market places have become increasingly competitive, and consumers expectations of brands have risen, the question really should come down to, can you afford not to make a great first impression?
For every business, the marketing budget will vary. You need to start by asking yourself what your goals are. If your goal is to build a business and brand that you can grow, leverage, and even sell in the future, then you need to invest the money to create an effective brand strategy to get off to a good start and ensure your best chance of success. Even thought the costs my be more than you initially thought, by the time you amortize your initial marketing expenses for the first two years, the cost will be minimal in comparison to the value created for your business. Spending the extra time and money to define your brand, what it stands for, and having solid marketing elements in place will pay dividends in the long run by making you stand out from the market place, and instantly begin to build a brand relationship with your customers.
While saving money in the beginning is tempting, you only get one chance to make a first impression. And one of the biggest mistakes we see companies make, and you have seen it all around you, is to try and save money by either trying to do it yourself, or the dreaded “my friend” will do it for me. (You can see branding gone bad in our article here.) Businesses that start with do-it-yourself logos and marketing materials achieve false savings. They save money in the short run, but they also cost themselves the benefit of a strong, competitive, professional first impression. (We will talk about what strong brand can do for you in a later post. But for now, think of it as momentum. ) The right brand strategy and execution can give you as much as a 50% better chance of success. If people get you and your message, then they are going to be that much more likely to buy from you. But the branding has deeper ramifications. In a hyper fast and unforgiving world, a good brand with buy your customers trust and loyalty. And as we have seen with companies such as Apple, it will allow you room to make mistakes and still maintain loyal customers.
As to actual dollar amounts, there is a huge range between the low end marketing solutions, and what it costs to build a professional brand and the accompanying marketing solutions. As a general rule of thumb, marketing budgets should range from as low as 10% of gross sales to over 50%. New companies may spend closer to 50% of sales for introductory marketing programs in the first year. Smaller business may just try to match the spending of their direct competitors. But be careful to copy and just match. It will take more effort to beat out a company that is a first mover and shaker.
It is also important to keep in mind to never get lazy, just because you grew a business to success with luck and little marketing, doesn’t mean that a competitor won’t come in and steal it from you with a real marketing budget. You should plan to establish a strong foothold and maintain it for at least the first two years to properly support and to ensure your marketing can grow and maintain/ achieve your competitive advantage.
What is the marketing budget comprised of in general?
A marketing budget typically covers costs for branding, core pieces (such as website, business cards, brochures, etc) advertising, promotion and public relations. Each amount varies based on the size of the business, its audience, the marketplace, and its annual sales and key components are how much the competition is advertising. The following are some general fee ranges:
Name Development & Domain Strategy
Brandmark (logo) creation
Website Design & Development
Collateral Materials (Business cards, brochures, look books, etc)
Advertising/ PR Monthly
Signage, Vehicles, Packaging Annually
We hope that this gives you some starting points to think about. At L7 we work with clients of many shapes and budget ranges. Contact us today to see how we can put together a professional solution for your budget range.