Does Size Really Matter At All When You Are Setting Your Marketing Budget?

by Tom "Bald Dog" Varjan

This is an interesting question. Many small and medium-sized companies invest only about 3-4.5% of their gross revenues in marketing.

Why so little?

Because their stupid, budgie-brained nincompoop owners regard marketing as an expense that must be reduced or, if it is all possible, completely eliminated.

Sadly many accountants don't understand investing either. They advise their business owner clients to reduce overhead costs, and since many accountants don't understand business beyond number crunching, they believe they do business owners a favour by advising them to reduce everything to the bare minimum.

"Hey, we don't make money, but we don't spend either!" - They cry

This reminds me of former US president, Jimmy Carter's period in the White House. He didn't do anything, so he didn't make mistakes.

I've met business owners, who, to their accountants' advice, terminated marketing initiatives that brought in $5 on each $1 invested. The dumb accountant was so hellbent on reducing operating costs that he advised the business owner to forego the 400% ROI to save some money.

However, most businesspeople can easily imagine their lives without doing any cold prospecting grunt work, but if you don't want to do the prospecting slavery, you have play the prospecting automation game. You have to create the proverbial honey pot that will attract the right people.

And now with a definite action, turn your back on the trivial many, a.k.a. a mediocre bunch, and take a look at the vital few, the businesses that, instead of more brawn, use more brain to have qualified prospects come to them. When you look at companies that produce 50% or more annual growth, you find that their marketing investment is around 13-15% or even 25%.

Look, you are in business anyway. Instead of just having the days tick by until you die, you can as well aim to belong to the proverbial (maybe the real) Fortune 500 not to the Misfortune 5 million.

You may say I see it the wrong way, but if I can get good ROI on my investment then I beg, borrow and steal as much as I possibly can, so I can invest it. Then I can return the money after I've got my return. Do you really think that Nike is on the top of pecking order because it sold so many pairs of shoes? Haven't you realised yet that Nike is a marketing company not a shoe-making company?

So, this is where the dog is buried. Do you see your marketing as an expense that must be reduced and eliminated, or do you see it as an investment? Now, if it is an investment, the return depends on the investment itself. So, what is the logic in minimising the investment?

The chicken and egg are subject to debate as to which one existed first, but in the ROI equation, the investment comes before return. You can't go up to the fireplace and say, "Give me fire and then I'll put in wood." The fireplace will laugh you out of the room. Not even harsh language will change the fireplace's mind.

At least I've never succeeded, although I have a strong accent and I've only tried it with English fireplaces. So the lesson here is that if you truly believe in your product or service, then make a decent investment and trumpet your message in all directions of the compass.

The other side of the same coin is that if you don't believe in your stuff strongly enough, then find something else. If you are passionate about making toothbrushes, then close your toilet brush business.

And remember! Don't sell harder. Market smarter. Both you, your employees, your clients and prospects will find it more enjoyable, profitable and attractive.

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