In their earliest days, dynamic startups are so intently concentrated on the product or solution they have created, and the innovative, creative concept behind it, that they lose focus on the key process of taking it to market, engaging with prospective customers, and driving up sales volumes.
If you are a budding entrepreneur, you will recognise the scenario: you wake up with the best idea ever – an idea that creates something you see as ‘incredibly unique’ or that solves a problem that your ‘customers-to-be’ didn’t even realise they had. You start working on it with dogged intent, overtaxing your energies, getting all the raw materials together and assembled, until one day you have a product in your hands. All you have to do now is let the customers roll in.
But as time goes by, you realise your plan has a flaw. Your products are still on the shelf. Prospective customers are not jamming up your email or heating up your phone lines. Sales aren’t rolling in. Why not?
Because people have no idea your product even exists.
If you are developing a startup, it should be no surprise that marketing is key to the success of your business. It’s your route to customers and enhanced sales revenues. In fact, it is just as vital as the product itself.
One doesn’t work without the other. Understanding that is the easy part. But if you don’t have a marketing background or knowhow, you are likely to find it difficult to decide how much to spend on marketing and then how to allocate your budget.
A great place to start answering these questions is to see where other companies spend their money and how that’s working for them.
Marketing spend as a proportion of revenue
A good way to analyse different marketing budgets is to look at them as a percentage of revenues. This way a single metric can be tracked and measured against a key performance figure and more easily compared with the strategies of other businesses.
In its CMO Spend Survey 2018-2019 report, Gartner found that among companies (with $500 million to $10 billion or more in annual revenues) in North America and the UK, had levelled off in 2018 to an average of 11.2% of company revenue. Of course, these figures represent relatively-established businesses and brands that have already made their mark in their desired target markets, whereas start-ups and smaller businesses need to invest significantly more to achieve the same level of market awareness.
Bright prospects for digital marketing
Moreover, despite the slight levelling off in chief marketing officer (CMO) spend over recent years, the future of marketing does look bright. According to the 2018 Gartner CEO and Senior Business Executive Survey, 57 percent of CEOs expected to increase their investment in marketing in the coming year. In addition, it is also true that digital marketing is rapidly accounting for a bigger slice of the pie, often at the expense of traditional marketing.
For example, Marketing Charts estimated, based on the PwC 5-year outlook, digital advertising in the US that in 2018 was nearly $30 billion larger than TV advertising.
Gartner’s CMO Spend Survey broke down the numbers.
The report states: “Spending on digital commerce chimes with CEOs’ digitisation goals. In a Gartner survey of 460 CEOs and senior business leaders last year, 62 percent of respondents said they have a management initiative or transformation program underway to make their business more digital. In short, the majority of CEOs recognise that they need to transact with their customers online, be they in B2B or B2C brands.”
These figures indicate the ongoing journey that many businesses are on towards digital transformation today. If you are a budding entrepreneur or start-up business, this growing focus on digital should also act as a clarion call that you must not neglect marketing as you launch new products, solutions and innovations but also that you are likely to need a strong focus on building a digital approach.
There is no magic number of how much to invest; it depends on your industry, your product, your growth aspirations and you have to keep the stage of your business life cycle in mind. Digital marketing provides a cost-effective and measurable way of targeting and engaging with a defined group of prospective customers. And it also provides a great way of educating them about your business in that crucial early engagement phase. Given its benefits in attracting prospects and building customer interest, it should come as no surprise that, for any start-up business, digital marketing is here to stay.