Juntae Kai Delane explains how to set a marketing budget by allocating 5 to 20 percent of customer lifetime value, depending on your business type. Pick a few channels, run campaigns for at least three months, and measure results. Marketing is an investment in education and customer acquisition, not a one-time expense.
Hey there. Today we're diving into a topic that's both essential and often confusing. That's how much money does a business need to spend on marketing? So we all know that we need marketing to bring in new customers. But how much is enough? So let's break it down. Some business owners often have a bit of a love and hate relationship when it comes to marketing. We all know it's critical to fill our sales pipelines and attract new customers. But at the same time, it's often tough to measure its overall impact. And when finances get tight, marketing is often the first to get cut. But here's the thing. There's a formula for how much you should spend on marketing as a business, and it can produce results if done right. Marketing isn't a project or a one shot deal. It's an ongoing function and a process in your company. And too many business owners would scale back for a short period of time. If sales are slow, then they'll ramp up as they get more sales. They may find marketing daunting because they see it as selling and fear of rejection from unknown prospects. But here's a mindset shift. Think about marketing as educating and being there when your customers are ready to buy. That's why marketing is about consistently testing various strategies over time. Start by deciding what solution you're educating your prospects about and where they will most likely see your message repeatedly. Then select a few marketing channels, whether it be online advertising, social print ads, email or whatever, where you essentially would provide this message for at least three months. And don't forget to measure the results. So the big question how much should you spend on marketing annually? Now many business owners under invest because they see it as a cost. Instead, consider it as an investment in acquiring future customers. To figure out how much to allocate, ask yourself this if the profit on each sale is, say, $50, would you spend $5 to acquire a customer? Most would say yes. Now imagine the lifetime value of a customer is $1,000. Would you spend $100 or even $200 to acquire that customer? Absolutely. Your marketing budget should be at least 5% to 20% less of your lifetime customer value, of course, depending upon your business stage and gross margin. And if you're just starting out or have high gross margins, you should lean toward the higher end. So there you have it folks. When it comes to marketing, it's not about how much you spend, it's about the return on investment. Now remember, if you found this video helpful, please like subscribe and hit that notifications bell for more insights. And remember, your marketing budget is an investment in your business's future success. Thanks for tuning in. And here's to making smart marketing decisions to drive your business forward. Until next time, take care.
