How do you know how much to invest in marketing? Tami and Joe talk about some of the key factors to consider before investing in your marketing budget, the five elements of a marketing budget, and one-time vs reoccurring investments!
Episode 8 Transcript:
Tami: Welcome to High Energy Marketing! A podcast with us, the digital marketing agency, Ajax Union, where we interviewed our CEO, Joe Apfelbaum, on key marketing topics, and we share everything you need to know to properly grow your business online.
This is a Q&A podcast, where I will ask Joe questions about different topics and trends in marketing based on his book, High Energy Marketing! You can get this book at ajaxunion.com/book to follow along with us. This is the eighth official episode of our podcast about High Energy Marketing. And today, we’re going to discuss a topic that almost every business owner asks about, marketing budgets, and how to create one if you do not have one.
But first, a little housekeeping. Please subscribe wherever you get your podcasts and rate us on Apple podcasts if you use Apple podcasts, that’s really very helpful. And you can find our podcasts and subscribe to it at ajaxunion.com/podcast where you can also find all the other episodes.
So first, let’s do a little inspiration of the day. Joe, do you want to hit us with a quick inspiration minute before we get started?
Joe: Sure, I love inspiration. The inspiration for today is all about integrity. I want you to think of this word, this concept called integrity. Because when you have integrity, things work the way that they’re supposed to. When you’re out of integrity, things break down and stop working. Now I don’t want people to confuse morality and integrity. Morality is about the difference between good and evil or right and wrong. But integrity is not about right and wrong. It’s about will something work, or will it not work.
When the spokes on a bicycle wheel are bent or missing, the wheel is no longer round. A round wheel that is not round is not bad, it’s just out of integrity. A wobbly wheel is not going to work very well, your bike will fall, and you’re not gonna be able to use it. But that doesn’t make it right or wrong. It’s not about judging the wheel, it just doesn’t have integrity. And the same thing works in every area of your life, especially your marketing. If you lack integrity, you don’t have power. And if you don’t have power, you don’t have effectiveness. And if you want to be more effective, you got to have a better relationship with integrity.
Tami: Amazing. Thank you so much, Joe. Let’s jump right into our questions about marketing budgets. So first, what are the five elements of a marketing budget?
Joe: The five elements of a marketing budget are strategy, assets, advertising, technology, and execution. When I ask most business owners, what is your marketing budget? Because that’s something I really have to ask somebody in order to determine what we’re going to do for them. I usually got the following answer, It depends on the results. If you get me great results, my budget might be unlimited. If you don’t get results, then what’s the point of marketing?
I always tell people, if you buy a house, there’s a budget, if you buy a car, there’s a budget. If you buy a laptop or a blanket, there’s a budget, maybe not for a blanket, but definitely for a laptop. That’s one of the questions people ask you when you’re like, what type of laptop should I buy? A budget is what you’re willing to invest to get the job done correctly. And there are different elements to a budget. And most people are not even aware of these elements are like, Oh, marketing is marketing.
But marketing is not just marketing, you really have to think about the five elements that I mentioned, which are strategy, assets, advertising, technology, and execution. Because each one of those has a different purpose and requires a different level of budget associated with it.
Tami: Okay, so why should I invest in all of these if I don’t know what the results will be?
Joe: Because in order for you to have a successful marketing campaign, you have to be able to invest in the right types of marketing. For example, strategy. Energy without strategy is a waste of time. A lot of people just invest in execution. But if you didn’t set your strategy and you don’t know what your plan is, how are you supposed to even know if he got an ROI? They say you should measure twice and cut once. And if you sharpen your saw for 15 minutes, you’re gonna save hours when you’re cutting down a tree.
The fact is, the right strategy will save you a decade. Investing in creating the right strategy is probably a really good investment than just starting marketing and just doing things because you need to determine how to invest the rest of your budget. And a basic strategy includes setting your goals, getting your target market in order, making sure you have the right messaging.
Could you imagine, if you didn’t set the right messaging, and you just start marketing with the wrong messaging to the wrong target market? It’s not going to help you get an ROI because you might get traffic, but you’re not going to get qualified traffic. So you have to invest in coming up with a strategy.
Now, a lot of people don’t even value strategy, like strategy? That sounds like it’s cheesy, it sounds like it’s a waste of time. But you have to invest in strategy if you want to actually be successful. It’s something that I didn’t understand. When I was a freelancer doing web design, I’d be like, just pay me to build your website zero strategy at all, I would just build a website for somebody and just hope for the best. Hope is a great thing, it’s just not a great strategy. You can have a shiny business card, but if it’s not strategic, it’s not going to be effective.
And the second element, which is assets, that’s really important for you to build out assets before you start marketing. How are you supposed to market something, if you don’t have assets, if you don’t have a landing page, if you don’t have a lead magnet, if you don’t have email logic, email automation, or banner ads? How are you supposed to advertise something if you don’t have banner ads? So I always tell people to make sure they have an arsenal of assets ready in advance.
So, when you start advertising, or when you start marketing, or when you start promoting, you have everything in order, you might need case studies, white papers, articles, these assets can be long-term investments, and make your business more valuable. And it will also extend the value of your marketing campaign as well because you’re going to have a better ROI if you actually have assets that are compatible with different parts of your funnel.
Strategy and assets are long-term investments that you have to make. Kind of like when you’re opening up a restaurant. You first have to make the restaurant look nice before a customer even buys. Right? Think about that. You start a restaurant, you got to get it all painted and organized, and you got to buy lighting, and you got to make it look nice. Get it on order before you even start even advertising the restaurant.
The same thing with your marketing, you first have to get your strategy right, then you got to get your assets. And those are two long-term strategies, long-term investments, that you need to make in order for your marketing to even work.
The next three advertising, technology, and execution are also important. But they’re more, how should I say, monthly expenses that happen on a reoccurring basis. And so advertising is, how you’re going to get traffic to your website? Well, the easiest way to get traffic is to invest in getting exposure through say Google AdWords or Facebook advertising. And often they’ll require you to have a daily budget if you’re like, oh, I don’t have a budget just like whatever it costs. That doesn’t work that way.
That’s one of the first questions Google asks you, or Facebook asks is, like what do you want to spend each day, and you have to be able to come up with a number. Now make sure you leave room to invest in advertising because advertising is important, especially if you’re looking for short-term results. Advertising allows you to test rapidly with precision and to know if a message is resonating with an audience or is not resonating with an audience as well.
Now, in order for you to get better conversions, you also have to invest in technology. The cost of technology may vary depending on the types of campaigns you’re going to run. But you might need an email service provider like MailChimp to send emails, you might need something a little more robust, like an email automation system like HubSpot Pardot, or ActiveCampaign, you might need landing page software like ClickFunnels.
You might need social media posting software’s you have to pay somebody to sit there and post social media every day, where you can just put it into a piece of software like HootSuite or Buffer. You might need lead identification software, mass tracking technology, or even call tracking technology.
All that will help you be able to get a better ROI. And often those technologies are not cheap. So you have to be able to put it towards your budget. And it all has to be accounted for. And finally, you need to take action.
You can have the best strategy in the world and the best assets, you can have great advertising and great technology. But if you don’t have someone managing all that, whether you’re using people in-house or using an agency or freelancers, you need to have execution. You need someone managing your ad accounts, you need someone writing content, you need someone developing web graphics, as well as reviewing analytics, project management, all that is part of the execution.
You even need a budget for meetings, because those expenses are also part of the execution. And so, setting the right budget for strategy assets, advertising technology, and execution will help you understand the elements of a marketing budget in this way, you know if you’re being successful, or if you’re not being successful.
Tami: So how much of your marketing budget is a one-time investment versus how much is an ongoing expense? Seemed like you kind of answered this question where the strategy and assets were more of a one-time upfront investment And then ongoing monthly expenses of advertising technology and of course, the team to execute on the strategy. Those are the ongoing expenses. Is there any more to that?
Joe: Well, strategy and assets, the reason why they’re one-time investments is because when you invest in them, typically you’re investing for the long term. It doesn’t mean you’re not going to have to do strategy in the future. It doesn’t mean you’re not gonna have to build new assets. But the bulk work on creating a strategy and assets happen really upfront.
So you can expect in the first 90 days of a campaign for you to spend more on strategy and assets than you’re spending on advertising, technology, and execution. But once you have your campaigns running, then it’s more about increasing your advertising if you’re getting an ROI as something that we spoke about before, a return on ad spend. And being able to implement new technology, if you see your conversion rate optimization needs to be improved. Or, if you need more execution, you need someone to do more organic SEO, or you need someone, maybe, more expensive to manage your ad accounts, or you need more content written on a regular basis.
You might need to invest more in execution. So where our strategy and assets are more of a one-time investment, that’s more long-term, advertising, technology, and execution are usually on a reoccurring basis. And when you’re working with an agency, you might call that a monthly retainer. When you’re working with an in-house person, it might be the salary that you’re attributing to your execution. But technology and advertising are definitely something that you’re going to have to do on a monthly basis as you move forward.
Tami: So I don’t think we’ve talked about this, but what is a test budget? And why is it so important? And how should I use that?
Joe: A lot of people have a hard time coming up with a marketing budget for an entire year, or for three years, like a long-term marketing budget. And the reason they have that is that they don’t understand what results they’re gonna get. They’re like, tell me the results. If I know the results, I’ll know what to invest, because I understand my business. So I always tell people, why don’t we set a marketing budget, that’s a test budget. Let’s set a test budget, let’s try to get a specific result.
So you might say that you want to get a 2:1 return on investment for every dollar that you spend in advertising. For every dollar that you spend in marketing, you want to get $2 back as a return. So you’ll say I want to invest $100,000, over the course of say six months. And I’d like to generate at least $200,000 in revenue from the 100,000 that I invested. And that makes a lot of sense, depending on your business and depending on your sales cycle, sometimes it takes longer to close a deal.
And depending on if it’s realistic, depending on the competition, you can set $100,000 test budget part of your test budget will go towards strategy, part of it will go towards building out assets, part of it will go towards advertising, some of will go towards technology and some of it towards execution. And you set your budget and you know what your goal is. Your goal is to generate double what you’re spending. And you will see on a regular basis, you’ll be able to determine if you’re getting there, because there are other metrics that you’re going to be checking, besides checking to see if anybody closed.
There are a certain amount of visitors that are gonna come, there are a certain amount of people that are going to download your lead magnet, there are a certain amount of people that are going to go through the process that it takes to become a customer.
And you know how many leads you have, how many are qualified, how many are marketing qualified, how many are sales qualified, and you’d be able to see progress towards your goal, you’re not going in blind.
That’s why marketing is very important for us to always be testing. Because your marketing budget, your test budget, is what’s going to enable you to be testing, that’s what’s going to enable you to be determined what our ROI is. So setting a budget, a test budget is really important as you’re starting out. And then you’ll be able to say okay, now that I know when I test with $100,000, it makes me $200,000. Now I could put a proper budget to this because I know it makes sense. And I could set a budget of let’s say $500,000 or $1 million or $2 million, depending on what you want to achieve, you know that you have to spend X to make X. And if you test it and it works, then you could increase.
Now the opposite is true as well. If you tested with say $100,000, and it really didn’t work well but you want to keep testing, you might next time, lower the budget to $50k. And see if you get a result by spending $50k it’s because maybe you’re going too wide. So you can change your budget around whether it’s going wider or go making it smaller so that you don’t waste money as you’re testing. But having a marketing test budget is extremely important, and it’s very smart to do.
Tami: Wow, thank you so much, Joe. That was amazing information. I hope that everyone listening got as much out of this as I did. In next week’s episode, we will be talking about why testing is so important in marketing, which Joe just kind of touched on a little bit. Make sure to subscribe to the podcast so that you can catch that next episode.
You can find the podcast at ajaxunion.com/podcast. And again, you could find the book that we’re following along in this series at ajaxunion.com/book. You can find Joe on all social media platforms at @JoeApfelbaum, and find us at Ajax Union on LinkedIn, Instagram, etc.
If you have any questions, check the description for all of our social media links. You can also email us at firstname.lastname@example.org. Our music is by Michael Suarez. This podcast was produced by Sarah and Shannon and edited by Sami Mititelu. Thank you so much. See you next week.