How To Know How Much Money To Invest In Advertising

Tips for Spending Marketing Dollars in Good Times and Bad

It's true, great marketing drives business growth. But how much should a company invest in marketing? And how should that money be invested? With the growth of digital marketing, the game is much different than it was just a few years ago. Learn how you can be wiser with your marketing dollars – in good times and in bad.

So how much should you spend in marketing?

Are you a small company doing less than $5 million in sales? If so, the U.S. Small Business Administration recommends spending 7-8% of your gross revenue on marketing.

If your business is more established with revenue over $5 million, the SBA recommends increasing yourmarketing investment to 12-20% of sales.

There are some interesting differences looking at various industries. Retailers spend a higher portion of marketing dollars while healthcare spends the least.

Where should you invest your marketing dollars?

Now more than ever before, marketers are accountable for their spends and the results produced. Improvements in analytics means that marketer have better data than ever. As a result, marketers are expected to maximize ROI and invest wisely.

Companies continue to increase their overall investments in marketing. Take a look at advertising. In 2019, total advertising spend is on track to reach $199 billion.

What's most eye-opening is the impressive growth of digital marketing over the past five years. In 2019, $103 billion will be spend on search marketing, display advertising, social media, and email marketing. For the first time ever, digital marketing spend will surpass traditional advertising spend (TV, print, radio, etc.). It's enough to make Don Draper fall out of his chair!

How should you spend in a recession?

The economy has cycles with good years and not so good years.

A lot of conventional thinking is that when times get tough, it's time to tighten the best. The marketing budget is often the first thing cut.

This makes some sense if marketing is not producing positive ROI and management has little faith in it. That money can better be spent making payroll and paying bills. However, if the company has a profitable and systemic marketing program, cutting the marketing budgets is the one of the worst things a company can do. It's stepping over dollars to pick up dimes.

If you have profitable, winning marketing support, an economic recession is one of the best times to invest. Why?

Think of the stock market. We've all heard the adage that it's good to buy low and sell high. If a stock investor is disciplined in this approach, she'll make a lot of money… more so than if she only invests when times are good.

During times of recession, there is less competition for marketing services and they're sold at a discount. While some companies choose to sit out of the game, you can score valuable points and become the leader. While others are quiet, your customers are more likely to hear your voice above the rest.

Then when the economic circumstances improve, you'll emerge as a market leader and you'll have all those customers than you acquired at a lower cost. So, don't sit on the bench when you should be in the game!

Marketing Channels with the Highest ROI

With so many different marketing options, it hard to know exactly where you should be spending your hard earned dollars.

I talked about the shift to digital marketing from traditional marketing like TV, print, newspaper and radio. Companies continue to vote with their dollars and they're voting for digital.

Where are you spending most of your marketing dollars? If you're spending a lot on trade shows, networking events, and print advertising, you may need to update your approach. A lot has changed since I ran TV and newspaper ads 20 years ago. Here is a blog we recently wrote on what digital marketing channels are producing the highest ROI according to business owners and marketing executives.

Spoiler alert! If you haven't done so already, you should consider investing in SEO, email marketing, and performance online advertising. Those are the three top performers from the study. And then game is always changing! There are promising opportunities that are emerging right now. Facebook Messenger ads and marketing automation tools like chat bots can help you build a steady stream of new, qualified customers.

Looking for More?

If you'd like to review your company's marketing plans, or just want to better understand your options, give us a shout. We can discuss what you're looking to do and provide more helpful tips.