How much should I spend on marketing my agency?

By Stuart 2 weeks agoNo Comments

I’m often asked by clients how much their marketing budget for their own business should be.

They’ve often heard that they should be spending in relation to turnover (i.e., I’ve been told I should spend 10% of my annual turnover on marketing).

In isolation, it’s not the best question to ask. How much you should spend on marketing your own business needs to be thought about in the context of what you’re trying to achieve.

So here are some pointers on what you should think about when putting together a marketing budget for your agency.

  1.  What are my goals?

What am I trying to achieve over the next 12 months with my marketing activity?

Are we happy at the size that we are?, or am I looking to increase my turnover by £100,000, £150,000, or £250,000?

How many new customers am I wanting to attract over the next 12 months?

Am I marketing to attract new customers, or am I marketing to increase the spend or the frequency of spend from existing customers?

Once you know these numbers and what you’re trying to achieve, you’ll be in a much better place to start working out how much you should be investing in marketing.

2.  Knowing the lifetime value of a customer.

If you were to think about how much a customer is worth to you over the period that they work with you, not just the next 12 months, then it’s probably easier to think of an amount of money that you’d be prepared to spend to get that customer.

For example, if a customer spends £10,000 a year with you, and on average customers stay 5 years with you, then the lifetime value of that customer is £50,000.

You’d be happier to invest a larger amount in obtaining a £50,000 customer than you would a customer who’s only ever going to spend a total of £1,000 with you, wouldn’t you?

Again, knowing the lifetime value starts to frame how much you’d be prepared to spend to get that customer on board.

3.  Understand your sales process.

So how much does it cost you to get a customer?

To work that out you need to know, first of all, how many leads coming into your agency are converted into customers.

For example, if you convert one new customer for every four leads that you generate, you know that if you are willing to spend £1,000 to obtain a customer, you’re going to have to spend £250 generating a lead.

 

Once you have all this information, you can then work out how much you’re willing to spend on marketing. So if I want 10 new customers a year, and I’m willing to spend £1,000 on obtaining a new customer, I know that my marketing budget needs to be £10,000.

Then the fun starts….working out where and on what to spend that budget!!

 

 

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  Creative AgenciesProfit Improvement
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