You know the truth about sex. And, if you want your small business start-up to succeed, you need to accept that most people — and this could include you — do not know much about marketing.
A big brand and a multi-billion dollar budget do not protect against bad ideas – Coca Cola’s New Coke and Quizno’s Spongemonkey campaigns come quickly to mind — but new companies struggle to find any money to meet their marketing needs. They certainly can’t afford to waste money on expensive blunders.
So, how much money should you spend on marketing your company? And, more important, how do you spend your money wisely?
The SBA recommends, as a general rule, that businesses with less than $5 million in annual revenues allocate 7 to 8 percent of their revenues to marketing, split about evenly between branding development and promotion.
Costs can run much higher — 20 to 50 percent — for a new brand in its first year and can dip to 5 percent for established brands. Competition, your place in the market and anticipated duration in the market (expected life of the product) play a role in deciding how much to invest in the first year.
Unfortunately, when you’re starting out, your marketing expenses come before revenues. And, although you might not mind spending $70,000 or even $500,000 on marketing expenses to earn $1 million in sales, it hurts to spend anything when you have no revenue and don’t know when or if you’ll meet your sales goals to make money online.
Think More/Spend Less
You don’t have to outspend your competitors to win your share of the market. But you do have to outthink them. Thinking is one of the least valued and ultimately most rewarding marketing tools.
The key here is to make every marketing decision based on the answer to one question: “Would my target audience like this?”
Of course, you have to know who you’re targeting. Don’t know? Need an immediate answer? Ask someone!
One of the reasons the New Coke campaign failed so disastrously is because executives at Coca Cola fell in love with their idea but never tested it on the only people who mattered: consumers. Similarly, Adidas put to market a pair of sneakers that featured a chain and shackles. They knew their target audience included African American teens but never bothered to ask anyone from this group if the shoes might seem an insensitive reminder of slavery.
Don’t fall so in love with your own ideas that you forget that your thoughts about your product, however brilliant, don’t trump the opinions of your buying public.
Take Advantage of Free Opinions
When it comes to finding out what people think of your ideas, the Internet has created a level playing field for small businesses. You don’t need to spend millions on focus groups and surveys. All you have to do is spend some time on social media and solicit opinions.
Just ask your questions in the right circles. If you’ve developed a new app, don’t ask other software designers and programmers what they think of your idea — unless you are marketing to them. What appeals to a tech-savvy person — the intricacies of the program – matters little to users. People don’t get more excited about the latest version of the iPhone because of the genius that went into creating it. They love it for what it does.
Find out where on the Web your target audience hangs out. If you’re selling to other businesses, test your marketing theories on Google + or Twitter. Selling to a college crowd? Find a university student with a big Facebook following and ask her to pose your questions. Do you think middle-aged, liberal white folks will want your service? Talk to the opinionated folks who hang out in the Huffington Post’s highly-read comments sections.
Need more free (but valuable) advice? Create a question-friendly environment at your business. Yes, you’re in charge and you don’t need a consensus to make decisions. But invite feedback on your ideas. If people on your team are afraid to speak their minds, they can’t protect you from making serious marketing blunders. If they know their opinions are welcome, they may come up with ideas even better than your own.
Since 1997, David Anderson has been helping thousands of entrepreneurs learn success with internet marketing and how to avoid the negatives and parlay the positives towards their own success and rewarding achievements.