Forum Moderators: skibum
Would you have to pay more of a percentage in the IT industry then say any other industry or should it be a set % accross the board?
That's a hard question to answer, and it depends really not only your type of business but also your costs.
A company that produces specialized widgets for a narrow industry may have high production costs but lower advertising costs (everyone knows to get special machine-tooled widgets from WidgetWorld.
A company that has a high margin on services may spend more for advertising to get its name out there, because the name recognition may be the only product-differentiator.
A sensible advertising budget depends on:
For example, if I currently spend 0.5% of revenues on sales, and I double that expenditure to 1%, I would want to see at least a doubling in dollars returned as sales.
Sometimes, there's a critical mass you need to invest in advertising before it does any measurable good. Money spent below the breakthrough threshold might be spent but have no ROI, but then when I raise advertising over the threshold, things start happening on their own.
Yes, I'm doing a lot of handwaving, but I'm not sure that there's a concrete percentage that can be defined as a golden rule for every business in every situation.
The best general principal is to pay attention to your cashflow and invest that money where you believe it has the best ability to grow your company's strengths. Feed the projects and events that are successful or have the potential for great success, and starve projects that are malingering or offer little chance of success. This drifts from marketing, per se, but From Good to Great by Jim Collins is an excellent read for this sort of business analysis.
Also, with paid placement search advertising it's my opinion that you should track your ROI and then spend every penny you can afford once you generate and acceptable cost per click. If you're spending $0.25/click to generate $0.40 in income then, logically, you should buy all the $0.25 clicks you can.
It really comes down to what you can afford. Subtract the cost of the item (including your labor) and the minimum amount you would like to make and you are basically left with your advertising budget. Of course you don't have to spend that much, but it's a number to start with.
This is very different from product to product. I've seen some companies spend 20% of revenue on advertising, and others less than 1%, and both be near the top of the bell curve.
Advertising on the net is cheaper than traditional media, so often you see small IT companies spending less than companies that advertise in hundreds/thousands of phone books across the nation.
A new company has a few options. They can just jump in like everyone else, advertise in the same places, and they will see some customers. This is common for ecommerce sites like yahoo stores that don't plan on seeing huge volumes of business, but want a share of the pie.
They can be creative and put out some press releases, direct marketing for local businesses, write a few columns for trade magazines, online newletters, etc. This gets them some publicity that doesn't cost a lot, but lets people know they exist, and starts the branding process.
The other option is to spend a bit more for branding purposes. It could be a ppc blitz that wants more impressions than click throughs, or some tv/radio ad spots, ads in email newsletters related to your business, etc.
It depends on what the business is, where your customer base is located (local, national, international, online) what kind of public perception you want, and who your client base will be.
If you sell tires, you want to market to mechanics as much as to the public, as they are the ones who will actually sell your tires, and recomend tires to people. For SEO start ups, often working locally with some radio spots, local portals, and geo targeting online gets you some customers to begin your portfolio and cover business expenses while you try to crack the online market.
This so depends on your market and your client base, that generalizations don't work very well.
If you're spending 10% of revenue on advertising, can you help me understand how you're calculating that amount.
Here, I'm assuming that you're speaking of a company's revenues rather than a one-person shop. If I'm mistaken, please let me know, but you used "we," so I'm taking this from the corporate angle.
Let's talk about what that 10% includes. Which of the following do you count?
If you're spending 10% of monthly revenue to place advertisements, then your total advertising cost is going to be much higher when you factor in the production costs (people, resources, and materials).
If you're spending 10% of revenue per month and it includes production and placement costs, then you're probably in a much better place.
Again, the viability of the 10% figure will depend on your ROI from the advertisements and your margin per sale over fixed costs.
But that is just our company (We are a all new dating website, only two months old). So far it has worked out for us very good since everytime we put money into advertising, we get it right back and extra money so we can do it all over again. Before you know it, we will be spending $10,000 / month in advertisinng!
What is the normal % to spend on Advertising?
For years we believed them and that the route to success was to spend a lot on advertising. To our company selling IT hardware in a very competitive field it sounded logical at the time. But we eventually saw the light and haven't spent a penny on advertising for years now. The company is showing healthy growth.
Advertising is not indispensible. It's not something that all companies need. And it's quite possible to grow an IT business without it. Build a lot of incoming links to your site, get blindlingly good SE results, get good coverage and reviews from the IT press, use press releases etc to their maximum potential, and THEN buy advertising IF you need it. You probably won't.
There are bound to be some people from the advertising industry here who will disagree or who will maintain that ads need to be used together with all the above, or that your growth will be restricted if you don't advertise. After listening to them for several years I've grown immune to all those comments :-) Most of our competitors who have been paying them a lot of money have gone bankrupt :-))
But, if you aren't willing to invest in the ideas above then I suppose you don't have a choice. Advertise till you drop.
There is no magical percent.
When we are working in a market where we are paid for repeat sales, we reinvest nearly everything.
