On average, a software company’s marketing budget is around 10% of gross sales. Of course, other IT firms incur or set marketing costs above or below this level. But, regardless of how large or small a marketing budget you set aside, it’s how wisely you spend each marketing dollar that matters. From prospecting with your IT contact list to actual conversion, your marketing spending should be based on a well-defined budget, and here are some guidelines to help you come up with one.
- Optimize your current mix. One of the first things that must come into your mind when thinking about budgeting is your current marketing mix. Find out what areas need improvement and make the most out of your existing website, direct mail, email, telemarketing, social media, and other channels. Do you need to improve on certain things like your landing page, contact list, networking, or overall market presence?
- Understand proper targeting. Just as how we send targeted messages to certain segments in our IT contact list for business newsletters, our overall marketing should be formulated in such a way that considers the impact of specific ads and content and identify which targeting approach maximizes a given budget.
- Use the 3 T’s. A good way to accomplish the above point is to apply the three T’s (test, track and tweak). The idea behind the three T’s is to take a certain variable, such as targeted keywords, database segment from a contact list provider, blog topic, etc., see how it impacts conversion rates under particular conditions, and then make adjustments to find the best outcome.
- Apply results to budgeting. Now that we have an idea of which things may or may not work when in software marketing, we can translate the results from applying the 3 T’s in monetary terms. Start by coming up with a marketing budget target range (e.g. 5% to 8% of projected annual sales) and then see if the tally from the previous results remain within or greater than this value. Make a profit estimate by subtracting marketing and other expenses from the projected revenues.
There you have it, an outline of how a software company should think about its marketing budget. Check out the next installment of this blog post to discover other helpful marketing survival tips for IT/software companies like yours.