Marketing? Who needs to waste money on that? I've got a great location and a lot of friends, so I'm counting on word-of-mouth.
This is a common but very dangerous misconception.
If you are considering opening a business or are in the throes of opening, make sure you have included a budget for marketing in your startup costs; a significant amount both for your launch and to cover the first few months. Subsequently you will need a monthly allowance going forward. You need to consider what percentage of revenues you want to devote to marketing and advertising. There will be trial and error, of course, until you are able to fine tune what is working for you and what is not.
There are always new vehicles and opportunities in advertising and marketing so make sure to stay abreast of the latest offerings. Not all of them will be appropriate for you but it is important to be aware of what is new and available. It is important to track how each vehicle performs and to use this information to make ongoing decisions. Knowing what works for your business, in your area, is key to your success.
Something that you must always remember is; marketing is an investment, and like all investments, you will track its return -- return on investment (ROI). To keep this simple: if you spend $1,000 a month on marketing and which results $5,000 in revenue, you just made $4,000 or 400% on your $1,000 investment. Thinking of marketing as purely an expense is not the right approach.
The formula to calculate ROI is quite simple:
(Gain from Investment - Cost of Investment) Cost of Investment
In the example above, your ROI would be 400%. $5,000 - $1,000 = $4,000 $1,000
As you can see, that is a hefty return; not something you are ever likely to see in the stock market or in other investment vehicles. You created your business to make money so make sure you make the investment that will insure your financial success.
At one point in my career I owned two day spas. When we opened the first location, we started marketing before we opened. We were busy from day one and remained busy. We followed the same plan when we opened the second spa with the same results.
I have observed many, many businesses and I always see the same pattern; business owners who commit to investing in their success with a strong marketing budget are successful, those who don't make the investment, who count on word of mouth or location to ensure success, usually don't last very long. I have watched people sign long leases, spend significant amounts of money on build-outs, etc., but they don’t invest in marketing or have a marketing budget and are generally in trouble very quickly. Don't make this mistake; it is a very costly one both financially and emotionally.
The following article below is a must read for anyone in business or considering opening a business.
Why Marketing Matters in These Times By Barbara Findlay Schenck
Every business owner who’s wrestling with budgets may sometimes wonder if marketing is worth the effort and expense it requires.
The answer, in three letters, is Y-E-S, marketing is worth the time and money it takes!
Even modest marketing investments deliver value over and over again — building your brand image, attracting new customers, generating repeat business, inspiring referrals and enhancing relationships that cement customers to your business. On the flip side, by cutting marketing you realize the savings once but forfeit the return forever.
Here are 10 reasons that I believe marketing matters, and why it’s still a sound investment in these economic times.
1.) Marketing is the process by which you attract, win and keep customers. The marketing process is circular — like a wheel of fortune. At the top of the wheel is research, which is how you learn about your customers, competition and market situation. After research, marketing continues around to product development, pricing and packaging suited to your market situation. The next step is distribution so your product is available and accessible to customers. Then it’s on to advertising, promotions and public relations, which lead to sales, which are followed by customer service, which prompts repeat business and referrals. Completing the circle is customer input that leads to more research — and the marketing process continues round and round.
2.) Marketing paves the way for sales. Selling isn’t a stand-alone effort; it’s a step in the marketing process. Selling takes research, product development, pricing, packaging, distribution and marketing communications. You need to take these marketing steps before you’re ready to present your product, make its case and undertake the business-to-customer transaction that results in a sale.
3.) Marketing is the link between your business and your customer. Without customers, businesses fail. And marketing generates the customers you need to succeed.
4.) Marketing helps you gain and maintain customer trust. Customers don’t buy products; they buy the benefits they believe products deliver. Marketing helps you learn what customers want, tailor offerings to their desires, convey benefits, communicate promises, and create the incentive that leads to sales and customer loyalty.
5.) Marketing builds your reputation. Marketing helps you succeed in the public eye through a set of specific steps: creating your brand identity, managing your message and delivering positive customer experiences. By taking these steps, you create and reinforce your reputation while building customer trust and loyalty.
6.) Marketing leads to cost-efficiency. Marketing requires targeted research to define your customers. And this research helps you avoid wasteful spending by investing in marketing communications aimed directly (and only) at those most likely to buy from your business.
7.) Marketing inspires customers. The biggest threat to sales isn’t another business; it’s your customer’s inclination to do nothing or buy nothing. Marketing shows you how to create and prompt the purchases of products people want to buy.
8.) Marketing makes products better. No amount of advertising can turn a weak product into a success story. Marketing starts with research to confirm that you’re selling what people want to buy. Then it involves continual product review and enhancement to keep your offering in sync with market tastes and trends.
9.) Marketing leads to stronger businesses. Marketing is steered by a plan that serves as the blueprint for sales success. In as few as a couple of pages, your marketing plan defines your business purpose, market situation, goals, target customers, brand identity, marketing message, strategies and tactics, marketing budget, and the action plan you’ll follow to achieve your objectives. It’s important to annually re-evaluate and update your marketing plan (read Market Makeover for help).
10.) Marketing gives small businesses an edge. Granted, small businesses don’t have the biggest ad budgets, but marketing is about far more than just advertising. Marketing is about building and maintaining customer relationships, and no one is better positioned for that task than the small-business person. By committing to the marketing process, you turn everyday business interactions into opportunities to learn and respond to customer wants and needs — strengthening your products, relationships and sales as a result.
There, now you have my top 10 reasons why you should seize your small-business advantage by protecting, defending, maintaining and strengthening your marketing efforts. Investing in marketing will help boost your business today and into the future. Let me know how it goes.
Barbara Findlay Schenck is a small business strategist, the author of "Small Business Marketing for Dummies" and "Selling Your Business for Dummies," and the co-author of "Branding for Dummies and Business Plan Kit for Dummies."