Introduction – Marketing Spend
In our last post we summarized HIF’s- High Impact Firms – let me backtrack and spend a little more time describing how we got here.
One of the top entrepreneurial foundations (Kauffman) built on the research started in 1980’s by MIT. One of their researchers, David Birch, identified the characteristics of fast growth businesses with an emphasis on community impact. Birch’s research showed these fast growth companies he labeled Gazelle’s created most of the new jobs in the US economy. Kauffman picked up his work and renamed Gazelle’s High Impact Firms. They continued the focus on how localities can attract job creators with incentives. In 2004 we took their research and focused internally on what the owners and executives did to create fast growth organizations. We transitioned our research to the landscape industry in 2016.
This post covers Leadership’s Focus on Resources – Marketing Spend.
Ready for this? High Impact Firms spend an average 12.5% of revenue on marketing. Tracking the marketing spend showed the return provided a 40% improvement over competitors. In fact, their focus on tracking marketing spend drove sales growth that was 9x faster with 18% greater profitability than the competition.
How Did They Do It?
- Marketing Budget
- Tracking the Budget
Marketing Budget. Based on current revenue, they spent between 3 & 13% on Marketing. If you do the math a $300,000 company should spend between $9,000 and $39,000 on marketing. How much you spend is important, how you manage it the key. BTW – the average marketing spend in the landscape industry with companies over $5 million is 10-15%.
- Fixed Marketing & Sales Spend
- Marketing & Sales salaries and support staff. If you are doing all the work determine how much time is spent and separate it out as part of the M&S budget.
- Brand advertizing campaigns (including production costs). Marketing has 2 overall objectives – create awareness of your business, and to sell a product or service. Fixed marketing spend is to create brand awareness.
- Sales Promotion materials at point of purchase (brand). Vehicle skins, signage, uniforms, business cards, brochures – everything is to create brand awareness and featuring a specific product or service.
- Website, SEO, social media (minimum of $100/month – target $1,000/month). At a minimum, you must create dynamic brochureware.
- Variable Marketing & Sales Spend
- Sales Commissions & Bonuses. Based on sales from the marketing efforts.
- Product and Service advertizing campaigns (including production costs). Variable marketing spend is on a product or service to generate revenue..
- Pay-for-click advertizing. Google, Facebook etc., that is focused on a specific offer, product, or service over a set period of time.
- Early payment terms. Part of a promotion, coupons, rebates.
- Sales Promotion material at point of purchase (product/service). Special sale, limited time offer.
- Service Recovery. Budget spent fixing delivery or service failures – it is a measure of quality defects.
Tracking the Budget. Try this one – ⅔’s of all businesses don’t track ROI. They do not understand if their marketing efforts are working. For example, they cannot tell if an email campaign produced any visitors to their website or a Facebook ad buy created new leads. If you get my drift – measure and track your marketing efforts and that will put you in a stronger position that 67% of your competitors. Why? Nothing works as planned and you cannot make midcourse corrections without understanding how people are responding. The following are 4 measures that will give you a shot at finding the 40% competitive advantage.
- Optimize for ROI – Social and Content Attribution.
- Page Views – how many new and returning visitors;
- Goal Conversion Rate – what percentage of visitors did what we you wanted, i.e. you want visitors to the homepage to go to the eCommerce page;
- Goal Revenue – how much revenue was generated from Goal Conversion.
- Prove Impact – Social, Content, Analytics
- Social website conversion – what percentage of individuals reached acted on your Call To Action (CTA);
- Blog website conversion – what percentage of visitors acted on your Call To Action (CTA);
- Ads website conversions – what percentage of respondents acted on the ad.
- Improve Market Position – Competitive Intelligence
- Comparison to competitors – increase awareness, improve brand perception, and % of budget.
- PR Impact on Funnel – News Monitoring
- Impact of news articles (blogs) to average brand awareness – impact of generated PR.
I will close with the simplicity of this approach. Allocate a set amount for marketing every quarter. Make the amount at least 1% of revenue, if you have the revenue start at 3%. Develop a theme for the next 3 months and break it down into weeks. The next challenge is creating a navigation plan so you can guide prospective customers through your online presences. Once you are clear about the path, divide the $$ to the activities that will achieve your goals. BTW – we will detail the navigation map and conversion goals next week in the GreenMark Newsletter. If you don’t get it – click here!
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