A business in the most elementary of terms is all about making money – though there is more to it. A business comprises some product(s); that being either service(s) or good(s). Those products are earmarked for the prospective customer(s) who are anticipated to buy them. For that to happen, you must be more alluring than other business players in the space. That progressive breakdown I just made clearly shows you why marketing is of vital importance. Your sales tend to be directly proportional to the marketing efforts that you put in for your business. Now that we have established the importance of marketing, how much should you spend on marketing?

Thanks To The Internet And Social Media

There has never been a better time to be in business than now. This is because of the much easier availability of data that can inform business decisions. This also should tell you that you must beef up your online presence as a business. Before the advent of digital marketing, as it is now, most things were blurry. Come to think of it how would you be able to ascertain whether or not your marketing campaigns paying off or not?

Google Analytics on websites and various built-in data analytics, along with impressions on social media sites now make it easy to make decisions. Again this tells you that if you are on these platforms and you are not leveraging on what I just mentioned then you are short-changing yourself. Why am I saying all this?

Returns On Marketing Invest Ought To Be Measured

When you invest in something you expect to get returns on investment. To determine whether or not you are getting those returns, you must measure some things. Not only will this let you know how you are faring but it will also give light to what decisions should be taken moving forward. How do you measure such metrics? Very good question and I will cite an example to make it plain.

Let us suppose you run an ad or boost a post on Facebook. Let us also suppose you spend US$10 on it. How then do you measure its performance? There are several things to look at and this varies from business to business but there are some fundamentals. An ad or post basically has likes, comments, shares, reactions, click-throughs, and so on. Let us suppose that you are mainly concerned with just engagements (or engagement rate).

Average engagement = ((Likes + Comments + Shares) ÷ Followers) expressed as percentage

This means if a post on a page with 5000 followers, received 300 likes, 1400 comments, and 245 shares, the average engagement rate is ((300 + 1400 + 245) ÷ 5000) x 100. That would be a 38.9 per cent engagement rate. Looking at that and the money you used for the ad or post can then inform on the conclusions you draw and subsequent decisions. That example was for one post so it means that you can add posts for a whole month to see what the average engagement rate was.

There are also other metrics such as amplification rate (shares relative to page followers), virality rate (shares relative to impressions), and conversion rate (actions as a result of click-throughs relative to a total number of page visits) amongst others. Do not worry much about these; I will detail them in future articles. I just wanted to show you that there are several ways in which digital marketing campaigns can be measured. What does this also tell you? It tells you that it is much easier to measure the performance of boosted posts or paid ads. Measuring the performance of organic posts is doable but it can be erroneous and limited.

How Much Must Your Marketing Budget Be?

At the end of the day, you want to budget for your marketing. Since most of your marketing will be informed by the website and or social media metrics it will be much easier. There is a rule of thumb when it comes to marketing budgets. Experts say that you must determine that budget not as some random figure but as a function of the gross revenue of your business.

This means your marketing budget must be a percentage of what your business grosses over a period of time. Recommended percentages vary so I will give you an all-encompassing range. Your marketing budget must range from 6 to 20 per cent of gross revenue. If your business has a gross revenue of US$500 per month this means the amount directed towards monthly marketing will range from US$30 to US$100. Depending on the marketing channels you use you will divide it up. Of course, digital marketing will have to take up the lion’s share. The metrics from earlier will help you determine specific amounts to even spend on an ad or post.

These are things you must fully appreciate so that you run your business empirically. Do not be in the habit of just throwing around figures without being strategic and calculative about them. On the budget, another thing to note is that advertising to other businesses tends to cost less than to customers. This means than a B2B business might spend even less than 6 per cent whereas a B2C will spend much more. This is an interesting area for any business and every business person must acquaint themselves with these dynamics.