How Much Should Retailers Spend on Marketing?

Before we dive into this, we want to stress that this is NOT a sales pitch for Bild Media or any other marketing agency. This is a question we hear almost daily, so we felt it would be beneficial for manufactured home retailers and manufacturers to read.

The simple answer is, well…simple. The answer is ‘more’. Manufactured housing retailers need to spend more on marketing. We’ll explain why in a second.

And again, this is not because they need to spend it with us or with anyone else. They need to spend more because the competition is spending A LOT more, and that competition is fierce and relentless.

Traditionally, we’ve thought of our competitors as the lot down the street, an apartment complex, or maybe the realtor/developer selling affordable housing on the other side of town. But in 2020, the competition is much more than what’s in our hometown or region. It’s everything that the customer sees in the digital space, which is a lot.

The digital world is loud, noisy even, and full of national and global brands trying to get your customer’s money. Just look at the chart below. Today US companies are collectively spending over $120 BILLION in digital advertising each year, and by the 2023, it will jump to over $200 Billion. That’s $600 for every man, woman, and child in this country.

worldwide digital marketing spend

 

What does it all mean?

What this means is that your potential customers are constantly hearing from brands on their phones, Smart TVs, computers, refrigerators (yes…), Alexa devices, watches, etc. And it’s not just advertising, it’s smart advertising that is VERY hard to resist.

Look at the chart below, comparing traditional vs digital marketing. Brands aren’t just putting more into digital, they’re slowly moving away from traditional advertising.

Digital vs Traditional Ad Spending

Back to Retailer Marketing…

Ok, now let’s switch back to MH for an example…

Do you get a lot of apps in February and March? Of course you do – that’s when many people get a big check for their tax refund, and it’s perfect for a down payment on a home. It’s also perfect for a large electronics purchase, and Amazon knows it. Amazon also knows everyone’s browsing history, so they’ll know what TV someone wants, and they’ll show it to them more often as they get closer to receiving their tax refund.

And if Amazon is good(and they are), it means that they’ll get your customers money before they have a chance to even see your lot. How much are they spending to get in front of your customers? About $13 billion in 2018, and that number’s only going up.

Amazon marketing budget

And it’s not just Amazon. New car dealers spend an average of $350 PER car in advertising, according to an NADA report. That Ford dealer down the road from you? Their marketing budget is likely closing in on $500k if you’re in a small town, and it’s well into the millions if you’re in a large metro area. And they’re trying to get your customers money too.

There’s national competition too – all looking for your customers money. Look at the top spenders in the US in terms marketing:

1. Comcast Corp: $6.12 billion in total spend

2. AT&T: $5.36 billion in total spend

3. Amazon: $4.47 billion in total spend

4. Procter & Gamble Co: $4.3 billion in total spend

5. General Motors Co: $3.14 billion in total spend

6. Walt Disney Co: $3.13 billion in total spend

And your customers will spend money with every single one of these brands. Do they need cable? Yep. Do they need a phone? Yep. Do they want a new truck from Chevy? Oh yeah. And do they like Marvel movies? Of course…who doesn’t?

All of the brands above are spending a fortune fighting to get your customers money. Fortunately, you don’t have to spend in the billions to get in front of your customers – you’re not a national brand, you’re a regional one.

Which brings us back to our original question, so let’s circle back: How much should manufactured home sales retailer spend on marketing?

Here’s what other industries are spending, as a percentage of their overall budget. Where do you think our industry should fall?

Digital marketing budget

If you ask the Small Business Administration, they recommend spending 7 to 8 percent of your gross revenue for marketing and advertising if you’re doing less than $5 million a year in sales. If you’re at 0%, that doesn’t mean you’ve ‘got it figured out.’ It just means that you could be selling a lot more homes if you advertised.

Let’s round that SBA number down to an even 5% and apply it to the industry so that we include ALL manufactured home retailers. The industry did about $7 billion in gross sales of new homes last year, and 5% of $7 billion is $350 million. If we followed their guidelines, our industry would have collectively spent $350 million telling the market how amazing manufactured housing is. And at the retailer level? If you sold $1 million gross last year, you should be spending $50,000 per year advertising, according to the SBA. We can say with 100% certainty that our industry does not collectively spend $350 million in advertising. But what if it did?

Want some stats useful for manufactured home retailers? Click here.

What if…?

And before you say $350 million is crazy, think about what would happen to our industry if every dealer DID spend that much. Would we see a dramatic increase in shipments? An increase in manufactured housing’s percentage of single family new home starts? A change in perception of our industry, simply because consumers would have more exposure to it? And would it all mean more business for everyone?

Our answer would be yes to all 4, but then again, we’re the marketing folks. ; )

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