Every business needs marketing, therefore every business should have a marketing plan. In Part I: Need Marketing, We recognized that marketing is a significant expense for any business, and we emphasized that without a marketing plan, a business essentially leaves its ability to grow and prosper to chance. For companies that are unwilling or unable to commit resources to building an in-house marketing infrastructure, a viable alternative is to outsource their marketing. It’s not as scary, or expensive, as one might think. For starters, know what you’re up against.
Marketing is a process, not a result
Understanding that marketing is a process is critical to accepting that marketing is not simply an expense that affects the bottom line. It is necessary; It is NOT a necessary evil. As the director of marketing for a large consumer products company, he was responsible for, among other things, sales forecasting, pricing, trade promotions, trade shows, new product development, market research, advertising, catalogs, and other materials. sales, sample distribution/fulfillment, package design, and trade incentive/rebate programs. He was in charge of “The Brand” and managing how all the components of the brand worked together to enable the company to achieve the forecast: the sales revenue projection.
A small business may not have all of the aforementioned components in place, but should at least have an annual sales revenue goal. It is the marketing plan that determines how the various marketing components will be combined to enable the company to achieve the forecast. That requires research, modeling, estimation, and a bit of guesswork, and if done right, it’s not a job that can simply be relegated to someone who doesn’t have enough to do. Marketing professionals understand this. They understand that trying to go to market without a marketing plan is like trying to hit a piñata, or in other words, like trying to hit a moving target in the dark.
If you don’t know who to call, ask your peers and associates to recommend a marketing contractor, or contact your local chapter of the American Marketing Association (AMA). Before contacting any referrals, visit their websites to get an idea of what they do and how they do it, not to mention how they present themselves. Look for information that will give you an idea that the company will be a good fit for you and your team.
Interview potential contractors similar to how you would interview a potential employee. What is your process? What are your expectations? Why would your company benefit from working with them? Explain succinctly what their needs are and be prepared to tell them candidly what your budget is. If they are good, they will interview you for the same reasons. (I meet with potential clients sometimes up to three times before deciding if they are a good fit for us.)
When it comes to the cost of marketing, what many people don’t understand is that the revenue forecast determines the budget. Just pulling a number out of thin air because that’s what you’re willing to spend on marketing is crazy. Most marketers know, for example, that the smaller the business, the higher the percentage of revenue spent on marketing. A business that generates less than $5 million in annual revenue will typically spend 7-8% of revenue, while a business that exceeds $100 million will spend 1-3%. That varies by industry and, more importantly, what the goals of the company are. If a company seeks rapid and substantial growth, for example, the percentage could be as high as 20%. If your company has annual revenue of $5 million, are you spending between $350,000 and $400,000 on marketing? If you want to double your revenue in the next two years (over 40% annual growth), are you prepared to spend $1 million this year and $1.4 million next year on marketing?
So before you sit down with any potential marketing services contractor, consider a realistic amount you can spend, then let the contractor detail what they can do for you with that amount, as well as whether they think that amount is right to help you meet your revenue goals. It’s also important to determine if you want the contractor to simply develop a plan for you or to also be involved in executing the plan versus other services and deliverables.
Now that we’re at the point of contacting potential contractors, let’s consider some of the variables that will affect the cost of the services the contractor will provide. Part III: What do I need vs. What can I pay? It will help you build your wish list and give you an idea of what to expect for what you can spend.