How Much Should I Spend on Marketing?

Well…that depends. How much money do you want to make? How many homes do you want to sell? Marketing is a path to increased traffic, which will yield increased home sales. It’s an investment in a business, and if managed correctly, marketing will always yield a great ROI. And unlike traditional marketing (more on that here), digital marketing is a measurable system that will increase your home sales as you invest more in marketing. If you invest $X into the system, you should get greater than $X out of the system. And that’s always good business.

Before we look at the manufactured housing industry, let’s look at general marketing statistics to get a broad picture of marketing budgets. According to the statistics website, Statista, the US outspends all other nations by a SIGNIFICANT margin. We more than double the next competitor (China) in terms of what we spend on a country in advertising. Here are some global marketing numbers from 2018:

On average, US businesses spend about 7% of their gross revenue (sales) on marketing. This means that a business with $1 million in annual revenue should be spending about $70K annually on marketing. This also varies by industry. For example, B2C (business to consumer) companies will always spend more than B2B (business to business) companies, and retail will always spend more than financial companies.

Here’s a look at ad spending by industry in the US. Retail is leading the pack with 21.9% of its budget dedicated to marketing, while Health and Pharmaceuticals come in at the bottom with just 2.6% of their budget allocated towards marketing.

To dive deeper into marketing spends in the US, let’s look at the largest spenders in terms of marketing in 2018 (from Ad Age annual report):

  1. Comcast – $6.12 billion
  2. AT&T – $5.36 billion
  3. Amazon – $4.47 billion
  4. Proctor and Gamble – $4.3 billion
  5. GM – $3.14 billion
  6. Walt Disney – $3.13 billion
  7. Charter Communications – $3.04 billion
  8. Alphabet (Google) – $2.96 billion
  9. American Express – $2.81 billion
  10. Verizon Communications – $2.68 billion

We know what you’re thinking: “These are all big business. What should small business owners spend?” Fortunately, the SBA (Small Business Association) has you covered: The U.S. Small Business Administration recommends that the average small business invest 7 to 8% of gross revenue in marketing and advertising. The main concept here – and this has been proven by experience and research – is that marketing drives revenue. There should be a direct correlation between spending more money on marketing, and an increase in revenue.

To go back to our example above, if you’re sales total $1 million per year, you should be spending about $70-80 thousand per year on marketing. If that seems high, it may mean that you haven’t found the correct channels yet for your marketing dollars. Marketing efforts should ALWAYS yield more revenue than they cost. In other word, marketing should always make money. If it didn’t, then no one would be marketing at all, and based on the numbers above, we know that’s not true.

Let’s look at Google Ads as an example. According to the Google Economic Impact Report, Businesses make an average of $2 in revenue for every $1 they spend on Google Ads. This means that for every dollar they spend on a google ad, they’ll sell $2 worth of products. Spend $1000, and you’ll sell $2000. This is an equation that just makes sense.

Now let’s circle back to our first question: How much should manufactured housing retailers spend on marketing? As an industry, we need to spend more to stay competitive. No one lives in isolation, which means that all of your customers are seeing the billions of dollars in ads from GM, Comcast, Amazon, etc. Amazon wants your customer’s money just as much as you do, and they’re spending billions of dollars to get it. Manufactured Housing retailers need marketing to grow their business.

And to answer that question, we’ll stick with the SBA’s recommendation: manufactured housing retailers should invest 6-8% of their revenue on marketing. If this is much, much more than you’re spending now, go up gradually. Don’t try and go from ‘zero to hero’ overnight. You need to first come up with a marketing plan, then increase your marketing budget based on what works.

Every successful business spends money telling the world about their product, and the manufactured housing industry is no different. Our homes offer a tremendous value to prospective home owners, and to grow our business and industry, we need to put resources behind telling consumers about our products.

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