“How much should I spend on marketing?”
That is the number one question I get when I talk to community operators and retailers about planning their marketing efforts for the future.
And the answer? That’s everyone’s favorite…: ) The answer is: “It depends.”
How much you spend depends on how much you want to sell, how well your team can sell, and how much bandwidth you have for growth in your business. There is one consistent trend through business though: Those who advertise the most, sell the most. Brands that advertise a lot, grow a lot and sell a lot.
Let’s look at some examples of brands you’ve probably heard of. Do you know who the largest E-commerce store in the world is? It’s Amazon. And who do you think spends the most money on advertising out of any e-commerce store in the world? That’s Amazon too. They advertise the most, and they sell the most.
And the largest brick and mortar retail company in the world? That’s Walmart. And guess which brick and mortar retailer spends the most on advertising? That’s Walmart too, with an annual advertising budget of about $4.4 BILLION.
It’s tempting to say, “of course they spend a lot on advertising, they’re the largest companies in the world!” And it’s true, they are the largest. However, believing that they spend a lot because they’re large is a fallacy in cause and effect. They don’t advertise a lot because they’re large, they’re large because they advertise a lot. Advertising causes growth, growth does not cause advertising. This is true in every industry across the world. Advertising gets attention, and whoever has the most attention, sells the most.
How much though?
“Yes, David. We get it. But how much?”
Is that what you were thinking? ; )
Our industry, as a whole, underspends by a tremendous amount based on its TAM (Total Addressable Market), so I’m going to look outside the industry for some concrete examples. Let’s look at car dealerships.
Though not housing per se, the automobile industry is VERY similar to manufactured housing in distribution and its customer. The manufacturer-retailer-consumer distribution model is the same, and cars and homes are both high price items. And everyone has to have each – we all need a place to live, and we all need a car to get to where we’re going. Other industry have similarities as well (boats, OHVs, RVs, etc), but they are not a necessity. Housing and transportation are necessities.
According to a recent report from NADA, the average advertising cost per unit sold on a new vehicle is $708. This means that for every new car sold, that dealership spent $708 in advertising to get that sale. If a dealer sells 1000 cars per year (the average in 2023), that same dealership will typically spend around $700,000 per year advertising.
Does that seem high? If $700K per year advertising seems like a lot, you might want to be sitting down for this next part…
The average gross profit on a new car is 3.9%, or $ 1,872, based on the $48,000 average price of a new car. This means that nearly 40% of the gross profit of a new car is going towards advertising that car. Could you imagine what it would look like if you spent 40% of the GP of a new house on advertising? That would be a whole lot of Facebook boosting! For our industry, however, 40% is too high. You do need a number per house, though, whether it’s percent or dollar amount. You need an advertising cost per unit sold to know how much you should be spending, and where.
$1,500 per home is a good place to start. There (should be) is enough GP to cover that, and it’s also enough to get some real traction in your market. To determine your overall marketing budget, multiple $1000 by the total number of homes you WANT to sell. Not how many you are selling, but how many you want to sell. If you want to sell 125 homes in 2025, budget $ 187,500 for marketing expenses.
Where And How To Spend It
To answer the question about where and how to spend those ad dollars, let’s go back to the automobile industry. ⬇️⬇️⬇️
f you look at the pie chart above, you can see that the typical auto dealer’s budget is distributed throughout all the different advertising channels, including ‘traditional’ marketing channels such as newspaper, direct mail, and radio. Manufactured housing advertising needs to be distributed in a similar manner. There is no one ‘perfect’ platform to use for manufactured housing ads.
If you’re not sure how to distribute your ad budget, just start with something simple. Try 1/3 to social media, 1/3 to search engine marketing, and 1/3 to traditional marketing. Track the results for a few months, then reassess as needed. There is no perfect solution – all markets are different, and all sales team have different styles.
I’m going to end on some food for thought for your business and your sales team: Figure out where you’re getting your best leads, and why. I talk to a lot of retailers that say Facebook is BY FAR the best place for manufactured home leads. That may be the case, or it may be that their sales team is best at working those leads, so that’s where the get the best sales. I also speak with a lot of retailers who say that phone calls are the best leads. That may be, or it may be that their sales team is not good on social media, so they can’t work those leads as well as the phone calls.
If you made it this far, thank you! This was a more data heavy email, and I appreciate you sticking with me to the end. Marketing isn’t always selfies, reels, TikTok, gumdrops, and Lolli pop smiles – it’s numbers, data, and dollars too.