We hear this question a lot. Many clients are either starting a business or replacing an outdated website. The initial response is ‘What is your budget?”. Of course that is typically a big secret. Clients are shopping around for the best deal.
So the next logical step is to figure out what the business objectives are. Lead generation? Sales? To create brand awareness? Some businesses are easier than others. We typically look for the shortest route from where they are now to the next logical phase. How to get something useful in market.
Typically we are replacing a website, establishing a content marketing program and social media presence. We may suggest that you build a website with a product tour and Facebook lead generation app with customized Twitter and Facebook accounts. The whole project may cost $25,000. But that recommendation isn’t taking into account the full picture.
That may make sense if you were working with a $45,000 budget for the year. The project would take about 6-8 weeks to complete and leave about $2,000 a month for marketing operations and enhancements. Assuming that would be in addition to in-house marketing resources; hopefully equivalent to 1-2 full time marketing persons. There are lots of variables.
Variable business models
The scenarios vary based on the business. For some business models, asking how much you should spend is like asking how much money you want to make. The key is to spend as little as possible to build an effective model. And once there’s proof that that model works, increase your spending. The rationale is, if spending $500 makes you $1000 and spending $1000 makes you $5000 then it’s logical for you to increase your spending as much as possible so long as the model yields profitable results. This model makes sense for any business, be it an online app, a restaurant, hair salon or law firm.
A common goal of almost any business is to increase the time customers and prospects spend online, engaging with the brand. And if you’re a business owner and don’t value the time your customers or prospects spend interacting with your online domains, then consider the following: research shows that people spend much more time building brand awareness before a purchasing decision is made. Keeping your brand top of mind with existing customers helps to optimize customer revenue and referrals.
There are many tactics involving your website, email marketing, advertising and social media activity that will support this. Every part of the equation can be tested and optimized over time to improve performance. Once your model starts working well you turn on the fire hose. You need to invest in the program systematically over time to get the optimum yield. Based on budget, resources and expertise you will focus more effort on different components over time.
Case Example – Hair Salon
Take a hair salon as an example. I get every hair cut late every time. I should be getting 3-4 more haircuts per year. If I did that perhaps I would spend 40% more on products. If I was engaged more effectively there is a certain potential for referral business. If a salon has 200 customers and could increase annual spend per customer by 20% plus increase customer referrals by 25%, then based on last year’s revenue and referrals you can build a financial model.
How do we do this? It would require an excellent marketing program including social, local, mobile, paid ads, email, website and SEO. There would be an initial investment in branding, technology investment and strategy to establish a marketing platform, first year marketing plan and launch. There would be a landing page strategy and ongoing campaigns to generate leads, schedule appointments, reschedule existing clients. We would set monthly goals for leads and conversion.
If the average customer spends $800 per year and that can be increased to $1200 plus four referrals the increase annual revenue could be approximately $100,000 and hundreds of new customers. You could hypothesise that the average client will remain a customer for 2.5 years. So a $60,000 investment per year for three years could yield $900,000 in revenue. That’s not all profit. After the $180,000 investment maybe 60% of the $720,000 is cost of sales. A portion of the other $288,000 may be invested in expansions and enhancements to make it possible to increase revenues further.
Don’t think of a website as a project
Too often companies make a big investment in a website and marketing materials without considering the big picture. The goal should be to figure out how much money you want to make. A sound financial model will help you determine how much you need to spend across your marketing program to increase revenue. The results may not be exactly what you expect but at least you have a strategy and soon you’ll have data, a baseline and insights to guide your investments.
How much should it cost to build a website?
It depends on your budget. If you have $25,000 to spend for the year then you want to spend as little as possible on the website. You need a budget for all the other marketing activities. Spend $200 on a logo and buy a cheap WordPress theme. Spend your money on a great marketing team to write content and engage your audience; spend money on advertising, lead generation, custom landing pages, and SEO. A great website is worthless if it doesn’t generate revenue.