Some time ago I wrote about this topic and said then the answer to the question..."depends".
It depends on what you are selling, to whom you are selling and where you are selling. There are so many variables that it's difficult to answer the question without more information.
This week I read a piece authored by John Heenan who assists advertising agencies in marketing themselves. That brought to light some interesting statistics that I think you'll find interesting as you attempt to advertise/market your company B2C or B2B.
When we look at some numbers we find the percentages are all over the board. According to Heenan, "Apple spends 7% of their revenue on sales and marketing, Tempur Sealy spends 15%, Oracle spends 20%, and Salesforce spends a whopping 56%. For B2B companies the simple answer is 6%. But it’s never simple."
Notice that last line..."But it's never simple."
Heenan goes on, "According to a 2014 AMA and Duke University study, 10% is the average for B2B. Does that mean 10% is the right number for you? Not necessarily. There are many factors to consider..." So let's break them down:
- Your Market - Who are you trying to attract to your product or service? If you are a retail business the answer may be very broad. If you are selling products or services to farmers your market gets less broad. If you are selling a service and you know the dominant decision maker your market gets less broad;
- Your Market Hangouts - Where are your people? For example over 1 million people attended the Iowa State Fair in August if you are marketing to a broad range of people maybe you should have been there. Conversely, perhaps your target market is teachers in that case you need to be where they gather for events;
- Your Current Customers - They are already coming in your door make sure they don't forget about you and continue to massage them with personal notes, calls and/or events. Just because they purchased what you are selling once doesn't mean they will be back unless you continue that relationship. Remember it costs less to keep a client than to find new clients;
- Your Cost Per Customer - What does it cost you now to land a new customer and where did they come from? Do you know or do you think you know? "Word of mouth" is a common answer as to how they heard about your product/service however that answer isn't always right...but it is the easiest.
Those four areas will help you start to define where and who your target market is and those are the first steps before you spend one dime on advertising. Remember finding out the answers to those questions all have a cost associated with the research...don't forget to include that in your base number.
See, told you "it depends".