It may be true to some extent that, you need to spend money to make money; however, small business owners often find it difficult as they have limited funds to spare.
Therefore, it is important for every marketer and business owner to understand the importance of managing marketing expenses effectively and learn to manage marketing budget effectively for all their campaigns to achieve business objectives.
The importance of managing marketing budget effectively
To keep your business profitable, you need to make sure every marketing money that you spend achieves the marketing and business objectives.
Therefore, effective marketing is essential for the success of any business. The key lies not just in spending money on marketing initiatives, but in managing those expenses wisely.
Understanding the importance of managing marketing expenses is crucial for long-term success, especially where resources are finite and the pressure to deliver results is constant.
1. Budget optimization
One of the primary reasons to manage marketing expenses is to optimize your budget. Allocating resources efficiently ensures that you get the most out of every dollar spent.
By setting clear budgets for different marketing channels and campaigns, businesses can avoid overspending and allocate funds where they are most effective.
2. Return on marketing investment (ROMI)
Effective management of marketing expenses directly impacts the return on marketing investment.
Tracking and analyzing the performance of each marketing campaign helps businesses identify what strategies are yielding the best results.
By focusing on high-performing channels and adjusting or eliminating underperforming ones, businesses can maximize their ROMI and ensure that their marketing efforts align with their overall goals.
a. What is return on marketing (ROMI)?
ROMI stands for Return on Marketing Investment. It is a metric used to evaluate the financial performance of a marketing campaign or initiative in relation to the cost of the investment.
ROMI is a variation of the broader concept of Return on Investment (ROI), specifically applied to marketing activities.
In simpler terms, ROMI measures the revenue generated by a marketing campaign compared to the cost of the campaign.
b. How does return on marketing (ROMI) indicates the business performance?
A ROMI value greater than 100% indicates that the campaign is generating more revenue than the cost invested, suggesting a positive return on the marketing investment.
Conversely, a ROMI value below 100% suggests that the campaign is not generating sufficient revenue to cover its costs.
c. How to calculate return on marketing (ROMI)?
The formula for calculating ROMI is:
ROMI = ((Net revenue from marketing campaign - Marketing Cost) / Marketing Cost) x 100
Example:
A company invests RM 10,000 in a digital marketing campaign to promote a new product.
Over the course of the campaign, they track the revenue directly attributed to this marketing effort.
At the end of the campaign, they found that the campaign generated RM 30,000 in net revenue.
Let’s extract key information from the case as below:
- Marketing cost: Rm 10,000
- Net marketing campaign revenue: RM 30,000
The ROMI calculation is as below:
ROMI = ((30,000 - 10,000)/10,000) x 100
ROMI = (20,000/10,000) x 100
ROMI = 200%
The ROMI is 200%, meaning that for every RM invested in the marketing campaign, the company generated RM 2.00 in revenue.
This ROMI is considered positive and indicates that the marketing campaign was successful in generating more revenue than the cost invested.
The company also received a strong return on its marketing investment, and the campaign was financially beneficial.
3. Financial stability
Uncontrolled marketing expenses can lead to financial instability for a business. Overspending on marketing without a clear strategy or measurement of results can strain resources, impacting other essential areas of the business.
By managing marketing expenses wisely, businesses can maintain financial stability and ensure a healthy cash flow.
4. Adaptability to market changes
The business landscape is dynamic, and market conditions can change rapidly. Managing marketing expenses allows businesses to be more adaptable to these changes.
Whether it’s adjusting strategies in response to new trends or reallocating budgets to capitalize on emerging opportunities, a well-managed marketing budget enables businesses to stay agile and responsive.
5. Sustainable growth
For sustainable growth, businesses must balance their marketing efforts with financial prudence.
Carefully managing marketing expenses allows businesses to invest in strategies that contribute to long-term growth rather than engaging in short-term, unsustainable tactics.
Sustainable growth is not just about attracting new customers but also retaining them and fostering customer loyalty.
6. Accountability and performance measurement
Effective management of marketing expenses requires setting clear goals and metrics for success. This creates a culture of accountability within the marketing team, encouraging them to demonstrate the impact of their initiatives.
By regularly measuring and analyzing performance, businesses can make data-driven decisions that enhance overall marketing effectiveness.
How to manage marketing budget effectively?
Businesses that prioritize the careful management of their marketing expenses are better positioned to navigate the complexities of the market, achieve long-term success, and stay ahead of the competition.
Thus, below are six great tips on how to maximize the return from your marketing budget.
Hire or outsource online freelancers
You could get access to both local and international talents who can provide you with a wide range of services that correspond to your business goals.
Freelancers typically specialise in one thing, and this is what you hire them for. Copywriters write content, mobile app developers build mobile apps, etc. The benefit is that they are very good at what they do.
Many have a great deal of experience with lots of different business backgrounds and projects as their wildcard. Each project that they work on and each client they collaborate with adds more knowledge and expertise to their portfolio.
Use your imagination for how you can leverage this pool of talent: maybe your business needs a logo, promotional art, or even a blog post.
On top of that, you might even get the job done faster due to multiple factors. This happens because when you’re hiring a freelancer, you’re hiring an expert to complete a task.
Partner with another local businesses
Is there another local business that doesn’t compete with you but has a similar customer base?
You might actually team up with them for cross-promotional benefits. For example, if your business has a graphic design company, you could collaborate with a printing company.
If you have a restaurant or bar that serves juices or smoothies, you could partner with a local gym.
Last year, iPay88 had a cross-promotional campaign with CIMB, where its customers who sign up or upgrade to BizChannel@CIMB Transaction Package enjoy fee waivers.
On top of that, there’s additional reward worth RM1,000 for iPay88 merchants. You may see the promotion here.
Set up a partnership in which both businesses display advertisements for the one another.
Share your knowledge
Content marketing is one of the most effective forms of online marketing, which costs almost nothing if you create the content yourself. You just need to understand their secret and apply it in your marketing operation.
Does your website have a blog section?
Write informational content that you believe would appeal to your potential customer base. Within your field, there must be certain unique knowledge that your customers may lack.
By sharing this knowledge, you’ll attract search engine traffic from people who are seeking such information in your industry.
Every time the information that you provide helps someone, you’ll strengthen your brand and establish yourself as an expert within your field.
You might even convert your visitors to your potential customers. Once you have a blog set up, make sure to promote your blog post on your social media accounts.
Networking
One free marketing tool that every business has access to is networking. Networking is one of the most effective marketing strategies outside there.
Where you network will depend on your business type, but a great place to start is a local business group on Facebook. You need to make sure that the group consists of local events that are relevant to your product or services.
Having a LinkedIn profile is important for keeping track of the connections you make and discovering new networking opportunities.
For business owners, you can start creating free events on free platforms such as Peatix and Eventbrite, where a business owner can promote their events while the public may discover your events.
Pay your suppliers on time
Wonder why I said so? You will save tons of money by taking up the advantages of discounts and avoiding late charges when you pay suppliers’ invoices on time.
As a result, you will gain goodwill and a better relationship with them that may result in better service and fairer prices in future projects.
Re-use, re-purpose
Does your company regularly absorb large amounts of expenses when creating brochures or online promotional pages?
The amount is high because, every time you start to create marketing material from scratch, you’re increasing your cost and extending the amount of time needed to complete and produce the material.
If the promotional item works well, save it as a template.
By doing that, you can save large amounts of money, because every time when you run another promotion, simply change the details in the template to save time and costs.
Conclusion
Convinced? Marketing is an important part of any businesses.
The challenging part of it is finding the right and suitable cost-effective ways to market your products/services and brand within the budget.
For small business owners, when it comes to marketing, you don’t need to be a marketing professional to get the public to know about your business.
You may even try out the Guerrila marketing strategy explained in our previous blog post.
With the right planning, it can help you ensure that every dollar is being spent efficiently. Give these tips a try and see how they work for your business.
