The Ten Percent Solution: Why Marketing Your Company is So Crucial
I spoke with numerous companies over the last year that felt they needed no marketing services. One company in particular that has since closed its doors told me point blank that they relied on repeat customers and word of mouth. Now don’t get me wrong, I think that any business should strive to get and to keep repeat customers. I also like the word of mouth concept because “positive” word of mouth means that your business is doing something right to please your customers. But these two concepts will not get it done for you.
The company that I spoke of claimed that it relied on repeat customers and it will do ok when times are good. The same customers will come back and spend a certain amount every year. But when times are bad that company and others like it will be toast. They are guaranteeing themselves 30%-50% loss in any given economic downturn. It’s just the way it is. When their repeat customers don’t have the cash to spend they won’t be repeat customers as frequently and that spells disaster.
Once the repeat customers have jumped ship then the existence of the business rests solely on word of mouth. But how many “word of mouths” are you going to get if you have had a decrease in business? Will the word of mouth strategy make up for your loss of “repeat customers”?
Properly marketing your company takes a steady commitment from you and from the gross profit of your company. Many owners think about marketing but it never sees the light of day once the numbers are run. Let me explain it a bit further. A small to medium size business (SMB) should be spending approximately 10% of its revenue on marketing. Some companies will spend more and some will spend less depending on many factors including the type and size of the business. 10% is a good starting point because it is not too high or too low for an SMB. If you are a giant like Coca Cola or Wal-Mart then 10% is too high. If you are a company with 50 employees then 10% may be too low.
It is better to spend a little more on marketing than a little less. Spending a little more can still provide good exposure, good information through research, and help you gain more customers. Spending too little will only hurt you and may keep your business from achieving a satisfactory profit. A solid plan should include a diverse combination of marketing techniques. Direct mail, search engine optimization, social media, print advertising, door hangers, phone calls, market research, and special events that are hosted by your company are just some examples of what you can do to gain exposure and thus make your company more profitable.
It seems scary to many business owners to sink 10% of their income into the unknown world of marketing but the more they educate themselves, the more they will see the effectiveness of a smart marketing strategy. Most companies that maintain a steady marketing budget in a tougher economy do well and don’t go out of business. For many others that make the mistake of cutting back their marketing budget, they tend to fail. Marketing is oddly enough less important in the good times than in the bad times. Marketing your company aggressively in a sluggish economy may be the only difference between you prospering and you closing the doors.
