Sunday, January 30, 2011

2 questions on modern marketing

Based on my recent columns on marketing in the National Post, I received a brief email asking me two questions:

1. What percentage of sales should be spent on a marketing budget?

2. What are the criteria in choosing a marketing agency? Because everybody promises you everything underneath the sun.

The author didn't tell me anything about his business, so I answered rather generically.

1. I don't think there are any hard and fast rules, but I don't think your marketing budget should generally be more than 5% to 8% of sales revenues. Of course in some industries (movies, soft drinks), it's much more. It basically depends on what you sell, how you sell it, and what kind of margins you get.

2. "Marketing agencies" can be very different things: PR agencies, web marketers, etc. I think the best thing to do is talk to some of the agency's other clients to find out what the agency accomplished for them.

Make sure you inquire about the sort of work that you're interested in buying. For instance, your questions would be very different depending on whether you just wanted a pretty website, or you wanted to boost sales through your website.

Marketing should always have goals and metrics attached. So make sure you find an agency that meets objectives and creates results for its clients.

All the best.

1 comment:

Andy Buyting said...

Here's a good rule of thumb for how much to spend on marketing if you're running a retail store or restaurant. Between your marketing and rent, a business should not spend much more than 10% of sales. So if you're in a high cost/high traffic location, then you should be able to succeed with less money spent on marketing. However if your location is away from the high traffic areas, hopefully you're paying less rent, and therefore can afford to spend more on marketing to get people out to see you.

There's a great rule of thumb.

In my last retail business, my rent (fair market value that I paid myself because I owned the real estate) was 7% of sales, therefore I had my marketing budget set at 3% of sales.

Worked nicely.