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Spend Money, Make Money: How Much Should I Spend On Marketing?
A playwright named Titus Maccius Plautus from the 200s–100s BC is credited with saying, “You have to spend money to make money.” We don’t know much about his life, except that he was one of the great Roman comic dramatists and a failed businessman. That doesn’t mean he was wrong, but he wasn’t exactly right.
To this day, entrepreneurs, business leaders, and, yes, especially marketers still use that adage to throw money at all kinds of things, as if spending alone is the solution to their problems. Yet, 82% of small businesses fail because of poor cash flow—often because firms are throwing good money after bad.
The important question isn't really whether we need to spend money to make money. It's about how we spend it. "How much money should I spend on marketing?" is the wrong first question. It should instead be: "How should I spend money on marketing?"
For your business in general and your marketing in particular, spend money where it matters. If you’re struggling to figure out where that is, you’re not alone. We’ve put together this overview of where investments work best for industrial firms based on our experience helping several businesses get back on track.
In every case, we started with a roadmap.
Planning your marketing spend
There's that other old chestnut, "Fail to plan, plan to fail." (Ben Franklin, in case you were wondering.) We've seen the aftermath time and again, especially with newer companies. When you make an investment with no clear strategy, you're planning to fail.
This is especially common with company websites. Over the years, we've been contacted by many firms that launched a new website, sat back, and waited...and waited...and waited for leads to come in. These companies didn't establish lead-generation goals for the site or implement targeted tactics in nearly every case. They'd simply built an expensive digital brochure without an SEO strategy, data tracking, or conversion optimization.
Whether you're launching a marketing initiative or investing in other business areas, building a roadmap is critical to ensure the money you spend will move the needle for your firm. The roadmap should have two main ingredients: a budget and a game plan.
- The budget aligns your growth targets with your revenue and expenses.
- The game plan acts like a GPS for your business decisions.
Not sure where to start with a roadmap? It’s one of our favorite things to do. Give us a shout to learn more.
There are all kinds of ways you can spend money to make money—if you establish specific goals and strategic priorities. Below are three areas where we’ve seen investments pay off for industrial B2B firms that are strategically spending.
The Three P's of Planning Marketing Investment
There are three business areas where smart investments are most likely to drive growth: People, Products, and Perception. Aligning your spending with these three principles won’t guarantee fiscal responsibility or increased revenue, but it will help. A lot.
Invest in People
Businesses invest in their people every day. It's called payroll. But investment in people doesn't stop there. Comfortable, happy people are more sustainably productive than their uncomfortable, unhappy counterparts. That's why money spent on talent retention and development is one of the best marketing investments you can make.
It can seem like an investment in people only moves the meter when it comes to your sales and marketing personnel. But consider the impact of improving the autonomy and skill of your workforce entire: less managerial overhead, higher productivity, improved employee buy-in and satisfaction. Your investment in people will improve long-term financials, reduce staff turnover, and provide your leadership with the time to strategize, iterate, and improve marketing processes.
When it comes to development, some firms focus only on hard skills like safety or compliance, with no particular goals in mind other than having a more competent, knowledgeable workforce. Short-term, that approach could increase productivity and profitability. It could also backfire.
Suppose hard skills are the only kind of training you offer. Your employees might simply realize that they're now more valuable in the market and go elsewhere, looking for more money. Which can end up costing you much more than you spent on training.
If instead, you invest in a combination of hard and soft skills training (" soft" being interpersonal skills, time management, etc.), you'll not only increase employees' happiness and productivity: You'll also reinforce your firm's value to them as a source of professional growth—in which case, they're more likely to stay.
When you factor employee acquisition and onboarding costs into your budget, along with any revenue gains from enhanced productivity, it's clear that employee retention drives profitability. In the long run, this strategic approach to workforce development supports your growth goals better than hard-skills-only training.
Just as important as making an investment is measuring whether that spend is paying off. If you’re investing in soft skills for your people, software like Know Your Team can provide valuable feedback on the difference you’re making for your team.
Invest in your product
When it comes to investing in product, some firms focus primarily on R&D. Of course, improving your product with new features, better quality, or additional options can spur more sales or command higher prices, driving up revenue. And, if your cost to improve the product is less than what you stand to gain, it's a good investment.
However, many firms fail to consider the inputs and outputs along their entire value chain. How much time and resources does it take to design, manufacture, and distribute a product? Where are there inefficiencies you can reduce? Investing in ways to produce and sell a product more efficiently can be just as profitable as improving the product itself.
This is where developing a strategic plan is crucial for identifying all the levers you can pull to reduce inefficiencies, improve product quality, and increase profitability. Scrutinizing all the inputs and outputs can show you where investing in equipment, R&D, or people will drive the results you seek. See? This ties right back to investing in people. You probably know better than anyone that employees who just clock in and out aren’t really invested in the success of your product or company. The better the team, the better the product and the processes behind it.
By investing in people’s technical, problem-solving, and leadership skills, you can help motivate them to streamline and improve your production and sales processes—especially if you have a roadmap to point them in the right direction.
One essential way to measure the impact of product and process investments is through client satisfaction research. Whether you use automated surveys or have an account manager call people to check in, invest in methods to make sure you’re making things better, not worse.
Invest in perception
For better or worse, perception matters. That's why mechanics wear coveralls to work, and bankers don't. Suppose your business doesn't project authority, reliability, or other essential qualities to your target customer. In that case, it's time to invest in changing those perceptions.
At its heart, marketing is all about perception. There's a reason it's sometimes called a marriage of art and science: there's a lot of fact-based, logical work to be in any marketing department, but so much marketing success pivots on feelings over facts. Spending marketing dollars on improving perception is a worthwhile investment for any business.
We've seen many industrial firms struggle with having their target audience perceive them as being too small to meet the needed capacity, even when they're actually a large company. More often than not, it's because every piece of their marketing screams "mom-and-pop shop." Outdated website? We're looking at you.
Many firms know they should be getting big contracts, but their marketing isn't helping them succeed. Branding is a massive part of that and an excellent place to start with an investment. Beyond branding, how you talk to people and what you talk about are vital in shaping the message you're projecting into the world.
If your intended message is getting lost in translation, invest in content that better supports your business goals. Too many firms are careless about spending on advertising and websites that use the wrong words to express what's meaningful to their target audience. Instead, identify the core message that's crucial to your success and invest time and money in creating the content to support it, including:
- Unique mission, vision, and values statements that resonate with your prospects
- Authoritative writing that projects the scale of who you are and what you can do
- An SEO-driven website strategy that ensures the right customers find you
- Storytelling that showcases the grit, hustle, and drive behind your firm
Above all, invest in hiring people who are good at this, so you don't waste money on more ineffective content. It is a specialized skill to craft your core brand message and deliver it through meaningful content. Spend the cash to get it right.
Not sure if your content is working? Here’s a cheap but effective way to invest in measuring the effectiveness of your message: Ask five friends to look at your marketing materials and ask, “If you didn’t know me, what would you think of this company?” It might cost a few beers, at most.
While we're strong advocates for building and following a clear spending strategy, we also believe you need to be ready to react to change. Blindly following a long-term plan can backfire horribly. Just look at what happened to Pepsi's ill-fated commercial with Kendall Jenner.
As part of its new "Live for Now" marketing campaign, Pepsi shot the commercial long before the Black Lives Matter movement took off in the U.S. It was slated to launch during the summer of 2000 when BLM protests suddenly surged across the country. With everything they'd already invested in the campaign, Pepsi decided to air the commercial anyway.
The ad showed supermodel Kendall Jenner doing a photoshoot and then "jumping in" with protestors marching along the road. Critics everywhere bashed Pepsi for co-opting the protest movement. The commercial was yanked off the air less than 48 hours later. The brand lost a ton of equity at that moment. The money they'd spent on that campaign was lost, too. In fact, the follow-on impact may have cost them millions more.
The world moves fast. A month ago, no one was talking about a war in Ukraine. Six months ago, no one saw the Omicron Covid-19 variant coming. That's why we recommend allocating at least some budget for rogue spending, so you can be responsive when market conditions change.
Be open to recognizing when spending money could actually lose you, and be ready to pivot your strategy to support your long-term goals.
Need some help identifying the most impactful ways to invest in your marketing? We'll work with you on everything from website user experience and advertising to branding and communication strategies. Contact us today for a free consultation.
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