Know-How Exchange : E-Marketing

If you are asking about a "rule of thumb" (RoT) marketing budget, then the minimum should be 1 percent of sales.

I personally hate RoT, and think that a marketer is better prepared to construct a detailed 12 month marcoms plan, list the activity, the rational, the benefits, the cost and ROI.

You can they see exactly how much you need and if you need to cut an activity, because of budget cuts, what you will lose.

I hope that this helps.

Without knowing all the details of your business, I think your biggest problem is that your costs are very high relative to your revenue.

You've stated that CoGS is 55% and that overhead is 35%. Setting aside the discussion that overhead *should* come down as a percentage of sales as revenue increases (at least in the short run), this means that 90 cents from every dollar you take in is already spent before you do any marketing or advertising.

I don't know your business, but this sounds pretty thin to me, especially if your plan is to earn a profit on the initial sale. If all you have is 10% to play with and you spend, say, 5% of your revenue on marketing and advertising, you have only a 5% pre-tax profit. If you're a wholesaler, that's great, but as a retailer (presumably) you should probably be aiming for more. That's just not a lot of wiggle room in case something goes wrong.

If these costs are set in stone, then there's only one way for you to make this work and earn a semi-decent margin: You have to get the conversion rate up.

To do this (and this is obvious, I know), you need to focus on (1) bringing less but higher-quality traffic to your site and/or (2) converting a higher percentage of the traffic that arrives.

How you do that is outside the scope of a bulletin board (especially the first one--take the advice you got an go to Wordtracker), but you might get some advice on the second one here if you provide some links.

Unless you're a one-product company, you should be sending people to specific pages on your site that are relevant to the search terms/results that they clicked. For the most part, if you are sending people to the home page, you are wasting your money.

Don't be shy about giving URLs, etc. This place is 100% "knucklehead free," meaning no one's going to go to your site and pages and make you sorry for sharing them in a public place. While very few other forums meet that test, this one is very safe and helpful.

I can guarantee that you'll get some great feedback.

Hope this helps.

Paul

I agree - your conversion rates are not out of line.

Your math definitely makes it sound like the PPC advertising is not the route to go. Then next question is, what other options do you have?

Some thoughts:
- Will reducing the price you pay to a number that works (even though you get a lower ranking) still bring in customers?
- Are there other places you can advertise that are most cost effective?
- Are you capturing email information from customers, and their permission, so that you can start sending them emails promoting your products and specials you may have?