My company is in dire need of some marketing support. We have been approached by a marketing group who has contacts in our field and they have set a specific number for three months worth of services (includes money for packaging, advertising, etc.). How much on average should a company invest into marketing?
So far, thank you for the help. Is there an available number value for a small business trying to sell a product in Home Depots and Lowes?
This varies based on what stage your company is in. In active startup, you can easily spend up to 20% of your gross sales in marketing. More established businesses may only spend 3-5%.
The more important question is what return on your investment you are receiving. You must understand the difference between lead generation and awareness building. If you are needing immediate results, you should approach your marketing as a directly as possible with a lead generation campaign. Depending on your type of business, my usual recommendation for first dollar expenditure for lead generation is search engine marketing. Other direct approaches include yellow pages, network marketing and lead purchasing.
Since you are being offered "leads" from a company, consider your close rates. If you receive a well-qualified lead, how many of them do you close? 1 in 5? 1 in 10? 1 in 2? This will give you an idea of how much you can spend per lead so that your acquisition costs are inline with your lead costs.
For example, if your cost per acquisition (CPA) target is $200 and you have a 1 in 5 close rate on well-qualified leads, you can spend up to $40 per lead to achieve your CPA.
