Your marketing budget: how to know if you're set up for success
For some businesses, their marketing budget is the last to be considered and the first to face potential cuts if business slows or takes a bad turn. It would seem to be counterintuitive to reduce any program that increases your business and helps a company grow. In a sector showing significant growth, such as the cleantech sector, new competition and new customer categories mean failing to actively engage with these customer groups could lead to irretrievable losses in market position.
With plenty now happening in the renewable and sustainable energy category of cleantech, there are more players in the space than ever before and more businesses deciding to enter. As a CEO, your marketing spend, and the plan that directs it has to be strategic. Your plan has to be agile. It is in such a context that CEOs need to ask: "What should we spend our marketing dollars on, and how much should we spend?"
Considering the landscape, what is the optimal marketing budget that maximizes growth in the renewable energy sector? Do you know what marketing tactics reach your customers? Drawing from years of experience in the industry, combined with the success of my marketing strategies for solar, wind, geothermal, and energy performance clients, I’d like to offer some insight into this critical aspect of business growth.
Careful budget planning is as important in marketing as it is in any other part of your business
The renewable energy sector has been volatile in the last few years. The market has seen players rise and fall, with new technologies and policies constantly reshaping the landscape. Now with the introduction of the Inflation Reduction Act (IRA of 2022) and the recent infrastructure bill (BIL) change is just as imminent, but more likely now to be a positive change. Because of the increased activity in the sector, budgeting is not just a finance task; it's a strategic endeavor.
The Balance Between Growth and
Your primary goal in marketing your cleantech operation is straightforward – fueling company growth. But how you go about this is crucial. Often, a firm that has had any past marketing failures tends to be under budget in subsequent years. Budgeting too little will handcuff your team, limiting your ability to harness the vast opportunities in the sector. Conversely, going overboard with your marketing spend can hurt profitability, undermining the very growth you have been seeking.
The Golden Rule of Marketing Budgeting
In marketing, there is a precept for determining the size of your marketing spend. It says to start at 10% of the additional revenue level your marketing efforts are targeting. For companies aiming to grow from $5 million to $10 million, that translates to an investment of $500,000. Nationally, companies are staying in the range of 10% while bouncing back from COVID-19 lows. Other studies show that companies in all sectors who are growing are spending at least 5% of gross revenue on marketing.
Key Components of an Effective Marketing
Once a company settles on the amount to spend, it’s time to determine the best way to spend that amount. Here are six of the key components of an effective marketing budget:
- Systems for Lead Generation:
A strategic lead generation system is the fuel for business growth. It will include regularly published content (blogs) online to attract a target market through search. A website built as a lead generation system will also feature opportunities to opt-in for the specific and targeted information your audience craves.
Without both strong content and lead capture opportunities, your business will struggle to engage visitors and turn them into leads. How this looks in your budget can vary. For some companies, it could mean it's time for website redevelopment. For others, it could be integrating apps into the tech stack that capture leads, plus creating the right "lead magnets" like white papers, infographics, and ebooks to entice website visitors to engage.
- An Effective Technology Stack:
We live in the age of digital marketing, and technologies ranging from CRM systems to AI-driven analytics tools are no longer luxuries but essentials. Invest in a stack that is fully integrated and can scale with your growth ambitions.
- Data Management/Systems to Manage Your Data:
Any budget should allocate resources for tools and systems to track, analyze, and optimize based on data-driven KPIs. You cannot manage what you cannot measure.
- Strategic Marketing Expertise:
Crafting a strategic marketing plan isn’t a task for novices. Ensure that part of your budget goes towards hiring or consulting with marketing experts who understand the nuances of the renewable energy market.
- Campaign Expenses:
Campaign Expenses include everything from your digital ad spend, promotional items and expenses, events, trade show booths, and so on.
- Operational Staffing:
Strategy without execution is just a dream. Your budget should provide for a team with the right skills – be it content creation, digital advertising, or event management – to bring your marketing plans to life.
Let’s stop for just a moment to be clear about something: When a marketing strategy fails, the reasons may have nothing to do with how much or how little your marketing spend might have been. Even the most generous of marketing budgets can go awry if the plan behind it is ill-conceived, and the skills of the team implementing the plan are not sufficient. In this situation, you may not be able to tell what’s working and what isn’t, and what your marketing has accomplished - unless you have invested in a data management system that can accurately report on the results of your marketing activity and how those activities impact your revenue.
The right mindset
CEOs and COOs whose businesses are poised at the brink of monumental growth should consider this: A marketing budget isn't a cost; it's an investment. And like all investments, it requires thought, analysis, and foresight. As the renewable energy sector expands and evolves, your company could ride the wave to a greener future. Marketing needs to be approached with the same seriousness as product development.
It’s not about spending more or less, but about spending right. And spending right begins with understanding the importance of each dollar and where it should go.
Essential CMO is the Fractional Chief Marketing Officer for the renewable energy industry and is based in Ann Arbor, Michigan with clients across the United States and Canada. Essential CMO is owned by Marketing Monsoon, LLC, a growth agency specializing in lead generation, client acquisition, and customer engagement with alternative energy, healthcare-related, and HR consulting companies. To schedule a Marketing Clarity Call, contact us at 866-851-1793 or schedule a call online.
Jayne Burch, fractional Chief Marketing Officer for the renewable, cleantech and sustainability sectors. I help CEOs in these companies achieve their goals and reach their target markets. With over 24 years of experience in business and marketing, I know how to get the job done quickly and efficiently.