It’s that time of the year again when you gather your business partners and executives around the table to discuss plans for 2019. Whether you’re starting a new business or running an established organization, one of the major dilemmas your team needs to answer is determining the appropriate budget for marketing. After all, you don’t want to invest heavily in developing a hip, niche product, only to end up with a fantastic product in your hands without the go-to market plan and promotional materials to drive awareness and sales.
In the mid-90s, Steve Jobs took Apple Inc. (which was on the brink of extinction) and turned it into one of the most valuable brands in the world. Jobs understood that a strong brand and marketing strategy is a powerful asset and a vital role in the success of any business, and Apple is one of many successful companies that spends more on marketing and sales than they do on research and development.
However, unlike Apple and other global corporations, many small businesses struggle to balance between spending on marketing versus other operations because they have limited resources and capacity. This is why it is important to take time to evaluate your marketing objectives and prioritize specific marketing projects. Below, we will break down the marketing budget, discuss essential areas to allocate your marketing resources, explore how to manage your marketing partnerships to optimize your marketing plan for 2019.
Before You Start
Refer to your marketing plan, if available. There are a few questions that you need to answer before you begin to set your marketing budget.
There are 6 common approaches to setting a marketing budget:
1. The random allocation approach—Possibly the most common method. Businesses that use this method follow no marketing strategy or plan. Budget is allocated based on impromptu efforts: “We need more sales; let’s have a campaign!”.
2. Keeping up with the Jones approach—Matching what the competitors are spending or reacting to a competitor’s increase in marketing efforts. Keep in mind that it is very difficult to establish what competitors are spending or how efficiently their budgets are being used.
3. The last year’s budget approach—Many organized businesses look at previous budgets and make upward or downward adjustments based on their evaluations.
4. The percentage of turnover approach—Organizations that use this method strive to establish an accepted marketing spend based on percentage of turnover (sum of money that the organization has collected from its normal business practices such as sale of goods and services). The generally accepted spend for a business in a steady state is 5%-8% of turnover, higher for new businesses or if there is a need to open a new market.
Note: If there are major changes in strategy, do not base your budget on previous budgets as those are likely to be irrelevant.
5. The task orientated approach—This method involves looking at the strategy and tallying up the costs of all planned marketing activities to arrive at the marketing budget. This may create a figure that you are not comfortable with, but it is the most strategic method.
6. The hybrid approach—Many businesses will incorporate several of these methods to come up with a realistic and flexible marketing budget that matches strategy with affordability.
Aside from selecting the appropriate budgeting approach, you also need to think about what you’re really investing in. Remember that advertising, trade shows, social media, mobile apps, etc. are only tools to help you gain and retain customers.
Thus, your first consideration should be “how much is a customer worth?”
The most straightforward way to calculate customer lifetime value (CLV) is to subtract the revenue you earn from a customer by the money spent on acquiring and serving that customer, where the total revenue you can expect to get from each customer is your average order value divided by one minus the repeat purchase rate.
Let's say that the value of an average order at your restaurant is $35. Also, anytime someone makes an order there is a 15% chance of the customer m coming back and making a repeat purchase. Finally, let's assume that it costs you $10 to acquire each new customer. (Figures are purely assumptions for demonstration purposes.)
CLV = [$35 / (1 - 0.15)] - $10 = $31.17
Your second consideration should be “what is the average conversion rate from inquiry to customer?”
Conversion rates (CR) are calculated by dividing the number of conversions by the number of total impressions, multiply by 100.
Your site had 2,000 visitors last month and produced 125 sales. (Figures are purely assumptions for demonstration purposes.)
CR = 15/2,000 x 100 = 6.25%
The point is that a marketing budget should not be perceived as an expense towards a single, immediate sale; rather, it is an investment in making and keeping a customer for the long-term.
By this point, you’re probably still wondering what other organizations are spending on marketing, just to gain a point of reference. The answer is: It varies by industry.
Below are some figures gathered in a 2017 CMO survey published by the American Marketing Association.
Percent of revenue by industry:
The SBA recommends that small businesses with revenues less than $5 million should allocate 7-8 percent of their revenues to marketing. This budget should be split between brand development costs (promotion channels such as website, blogs, sales collateral, etc.) and the costs of promoting the business (campaigns, advertising, events, etc.). This percentage assumes your profit margins fall within the range of 10-12 percent.
Where to Spend
Using the SBA recommendation as a reference point, you may want to consider setting a 5% of revenue marketing budget for your regular marketing activities, with added spending on periods that require extra marketing efforts to meet changes in strategy or to upgrade/enhance your marketing foundation.
You’ve probably heard the term “go mobile” tossed around by various blog posts, articles and influencers. You know that the world is becoming increasingly mobile, but what does that really mean? How will this affect your organization? Most importantly, as a nonprofit, what do you have to do to get the most out of your mobile audiences?
Below are five ideas to help you grow your nonprofit organization with mobile apps.
1. Get Your Own Mobile App
As a non-profit, your biggest focus, aside from making a difference in your cause, is going to be fundraising and growing memberships. With the increasing mobile traffic (check out these mobile trend stats on Smart Insights), a mobile app is the perfect channel to connect your audiences with your cause. Create your own customized app to present your messages and for your members to download to their smartphones for easy access. You can either build your app in-house or outsource to a mobile app agency. Your choice will have to depend on your organizations's resources, capacity, size, and what you need it to do. Here are some specific considerations for build-in-house versus outsourcing along with some relevant costs, for your references.
2. Go Mobile with Fundraising/Donations
Did you know: According to Artez Interactive, a fundraising technology and services provider, nonprofits that offer mobile app donation services generate up to 123% more individual donations per campaign than organizations that don’t. Make it easy for your members to donate by implementing easily noticeable “Donation” buttons on each page of your app. Use the app to encourage subscriptions and to track gifts. Employ a rewards program to thank your donors for their gifts and to inspire more people to give. Send your donors small gifts or honor badges based on the levels of donations.
3. Send Updates
People donate because they support your cause and want to make a difference. That’s why sending routine updates on the progress of your projects is essential to retaining and growing your organization’s memberships. In 2007, The Humane Society of the United States campaigned against the commercial hunting of seals in Canada and offered its subscribers live updates during the annual hunting period. According to Grace Markarian, manager of online communications, about 10,000 people signed up for updates in the first year. It’s a powerful way to build an engaging community around your campaign. You can send mobile updates via push notifications.
4. Expand Your Business Network
Link your app with other local businesses to increase member interactions and raise awareness for your cause. Passionate about fair trade? Designate a page on your app that locates local cafes that serve fair-trade coffee and tea, and allow members to share other fair-trade locations. Building a strong coalition with other businesses that share the same vision is key to long-term success.
5. Gamify Your App
Although your causes are serious, the membership experience can be fun. Gaming is an effective way to attract and engage new members for your campaigns, fast. For example, if you’re raising funds for a tornado-struck town, allow donors to “adopt” projects in the town. Then, as the funds start to make an impact, enable users to upload real before and after pictures. This fosters a sense of teamwork and directly connects the donors to the problems to which they are contributing. Allowing donors to see immediate impacts motivates them to remain active members for the long-term.
The key to building and sustaining high-impact nonprofit organizations is making members believe that their contributions are making positive changes to the issue. Employing mobile app effectively connects members to your organization and its projects in a way that is real time and personal. Take advantage of the app’s ability to increase donations, update your members on the status of your campaigns, and allow members to participate in your projects.
Do you need assistance acquiring and/or launching a mobile app for your organization? We're here to help! Please send us a message or leave a comment below.
The rate of change in lifestyles driven by digital innovation has forced consumer-centric industries such as retail to evolve. E-commerce and digital retail have added entirely new retail experiences to which customers have quickly become accustomed. These experiences are defined by 24/7 easy and fast access to sought-after items, personalized offers based on known preferences, and a frictionless buyer journey.
According to research from a 2017 Robin Report, despite the surge in the growth of e-commerce, more than 80% of retail sales still occur in-store and shoppers still appreciate in-store shopping for browsing and the ability to touch and try on items before purchasing. However, brick-and-mortar retailers need to adapt to the impact of e-commerce and digital retail in order to remain a meaningful and positive part of the consumer experience.
To stay relevant to consumers, retailers must combine the convenience and efficiency associated with online shopping with the benefits and experience of in-store shopping. By merging these attributes, brands can meet the needs of today's connected consumers and deliver a new, connected experience. Below are four ways to accomplish this synergy.
1. Empower store associates with mobile technology that enables instant visibility into the entire product assortment and inventory.
This is something that customers have become accustomed to online and the connected consumer expects the same in-store. Mobilizing your sales force with digital technology allows the consumer to get what they want, when they want it. Empowered associates that can provide faster and more valuable services to customers in-store serve to increase the value of that physical retail experience to customers.
2. Offer an immediate option to have items delivered directly to the shoppers' home.
This generates transactions that may be lost due to lack of stock in that location, customers' preference not to carry the items, etc. This especially appeals to the growing "I want it now" consumer and urban areas where local delivery of everything is becoming a normal part of life.
3. Provide timely product recommendations.
Based on what the shopper has in-hand or has asked to look up for in inventory, a digitally connected store can provide intelligent, personalized product recommendations to better engage, inform and support a customer. It also allows store associates to have more information on the product(s) and access to reviews — an online shopping aspect that would enhance the customer experience in-store. These kinds of capabilities allow the store to become an active part of the customer’s shopping experience.
4. Analytics and optimization.
Mobile technology can provide managers with data on overall customer servicing and individual associate performance (if each store associate is equipped with a mobile device). For example, data can be gathered on how many customers an associate services, how long it takes for an associate to accept a service request, as well as how long completing that request takes. This can help managers track and analyze the efficiency of the service and develop ways to maintain or improve associate staffing, timeliness and efficiency. Similar to e-commerce businesses, the ability to gather analytics data on store operations is the first step to creating opportunities to optimize the customer experience, enhance efficiencies, and drive more sales.
Speed and quality are becoming such significant factors in customer experiences; they can make or break consumer loyalty. Today's independent shopper expects a frictionless journey.