In this article, we delve into the roles that marketing and PR play in business, the reasons for investing in them, and how to determine the necessary budget.
Marketing and PR have long demonstrated their crucial role in business development. Increasingly, business owners are allocating funds for marketing and advertising even during the company's initial stages. Moreover, large businesses are expanding their marketing expenditures each year.
For instance, according to Gartner, a research company, in 2022, global companies' marketing budgets grew to 9.5% of the total business revenue, compared to 6.4% in 2021. In Kazakhstan, advertising spending is also on the rise. According to experts from the Advertising Association of Central Asia (AACA), during the first quarter of 2023, the cumulative advertising spending reached around 17.3 billion tenge, a 26% increase compared to the same period in 2022.
Why should investments be made in PR and marketing, and how should they be calculated?
To start, let's understand why companies invest in marketing and PR. The primary goal of any business, as noted by Alexander Likhtman, the founder of the PR agency ITCOMMS, is to generate profits. To achieve this, companies launch new products, enhance sales departments, announce bonus programs, find partners, engage in collaborations, publish valuable materials, and perform various other activities. Marketing and PR play a role in many of these activities.
Both these areas work with the target audience, attract potential clients, and aim to increase sales. Marketing directly affects a company's profits – running advertisements leads to acquiring customers and sales. PR, on the other hand, has an indirect impact by creating a positive public perception of the company.
According to Alexander Likhtman, there are three approaches to marketing:
It helps a business grow by providing solutions to customer problems.
Marketing facilitates the swift sale of nearly any product.
I don't need marketing.
The first two approaches are about boosting recognition, attracting customers, aiding in sales, and achieving set goals. The third approach can be chosen if the business holds a monopoly in its segment.
Investments in marketing help better understand the market, the audience, how to reach them, communicate about the company, and persuade them to buy, ideally on a regular basis over the next 3-5 years. Once this information is obtained, the marketer's task is to accomplish the same but faster or more cost-effectively (emphasizing what's necessary).
Alimzhan Bisembaev, author of the Telegram channel "Marketer's Blog":
For instance, the company Nintendo has been creating and selling gaming consoles since the early 1980s and has also cultivated a fan base for its game involving Princess Zelda.
Understanding the audience's age, marital status, and attachment allowed them to transition a vast community of fans from one gaming platform to another as the player generation shifted. Could this have been done without marketing investments? The example of its competitor, Sega, suggests otherwise.
The situation with PR is slightly different. PR works on building long-term relationships with the public.
This helps create a stable support base for the company over the years among various target groups: customers, partners, media, quasi-government sector, authorities, investors, employees.
Maya Leonova, Head of the Ideology and PR Department of a major Kazakhstan holding, member of the PR Professionals Club in Kazakhstan, author of the book "Good Text."
The expert highlights several arguments in favor of investing in PR:
Marketing support. In the long run, the strength of the brand is most influenced by well-structured PR.
Crisis management to minimize damage to the company's reputation.
Reputation building through "myth management." If the target audiences are not provided with a clear image platform and benefits of interacting with the brand, they will start creating myths, inventing and distorting insufficient information.
Strengthening the HR brand. Here, employees should be seen as its first and foremost ambassadors. A high-quality internal image becomes a tool for many functions: service, sales, marketing, recruiting.
Achieving key financial business indicators. A motivated team and loyal customers directly impact the achievement of net profit.
Thus, marketing and PR are important parts of the business directly linked to finances. But then, why consider investing in them?
Here, experts highlight three main reasons why evaluating expenses in these directions is necessary:
You understand how effectively the company's resources are being utilized. You see successful and unsuccessful campaigns and can reallocate the budget towards the most effective methods.
You see the ratio of profit to expenses for these efforts, how much each invested unit of currency has brought in revenue for the company.
You can calculate potential expenditures and plan the future budget for any of these activities in advance.
This knowledge provides control over the situation and shows the complete picture: the average cost of acquiring a customer, which advertising channel worked better, whether the expenses paid off, how many customers you need to attract next time, and how much money will be spent on it.
Alexander Likhtman
What's to be counted?
Under the category of marketing and PR expenses, you can include gifts to partners for holidays, the development of social media profiles for key company figures (Social Selling), participation and payment for contests, and much more. It all depends on the company's strategy – some may not give gifts to partners or host events, while others might utilize various promotional channels and need to calculate costs for all activities.
In the general list of marketing and PR expenses, you might find:
Advertising campaigns: payment for advertising spaces, pay-per-click ads, creation and promotion of advertising materials, payment for influencer collaborations, outdoor and TV advertising, etc.
Website creation, content preparation, and subsequent SEO optimization.
Social Media Marketing (SMM): writing posts, content preparation, launching targeted ads.
Conducting research: payment for services, conducting surveys, market research, consumer behavior analysis, etc.
Events: venue rental, catering, advertising, or direct invitations to target audience representatives (in the case of press conferences, investment activities), etc.
How to Calculate Investments in Marketing and PR?
To calculate investments correctly, it's important to define your goal. Why are you running advertisements? What do you need PR for? Determine what exactly you want to achieve through marketing and PR activities. This could be increased sales, brand recognition, attracting new customers, etc.
The goal helps measure the final outcome. For example, you need to acquire 10 new customers. To achieve this, you launched ads with popular bloggers, organized events, and had three media publications. As a result, you achieved a broad reach, your brand was mentioned on social media, but you only got 5 new customers. The conclusion – the goal was partially achieved; you need to review and adjust the strategy.
Alexander Likhtman
There's no exact figure for how much money should be spent on marketing and PR. It's individual for each business and directly depends on the main goal and available resources.
What Can Help Formulate the Budget?
Consider accumulated data. For instance, on average, how much do you pay to acquire a customer, and how much revenue does one customer bring you? By basing your calculations on your own data, you can more accurately budget and optimize advertising settings during marketing activities.
Look at industry averages. The cost of acquiring a customer in the B2B sector will differ from the same metric in the B2C segment, such as the beauty industry. Simply put, a client for an advertising agency with an average bill of several hundred thousand tenge will cost more than clients for a beauty salon with an average bill of 10,000 tenge.
Keep in mind industry specifics, seasonality, and market conditions. If you sell Christmas trees, you'll have more customers in December (and attracting them might cost less) compared to June. You can apply a seasonal coefficient in your budget calculation. In practice, this coefficient should be determined based on your industry's values as well as your own accumulated data.
Calculate how much producing content, managing social media, generating leads and sales through each channel costs you, how much customer acquisition and retention costs. Today, marketing allows you to gather a lot of data and even assess creative effectiveness, so my advice is to favor data and numbers – they help make the right decision faster.
Alimzhan Bisembayev
Evaluating Investments in Marketing and PR Can Happen at Different Stages:
Before the project: Define expected outcomes, goals, budget, and the metrics you're targeting. The main metrics are usually ROI (Return on Investment) and ROMI (Return on Marketing Investment) – they show the level of profitability or loss in the business, considering the invested amount over a specific time frame. Additionally, identify intermediate metrics that indirectly influence the final result – profit. These metrics could include lead cost, sales cost, conversion to purchase, cost per touch, and click on advertisements.
During the project: Monitor expenses and results. By comparing actual figures with planned ones, you can adjust your strategy for better outcomes and optimize your advertising campaign. At this stage, focus on intermediate metrics since high-level ones might lack sufficient data. Throughout, remember your main goal and focus on effectively achieving it. For instance, if your goal is to increase the number of customers, you received an appropriate cost-per-click, but customer numbers are low and they aren't buying your product. In this case, the cost-per-click won't be decisive, as the main goal is customer acquisition.
After the project: Conduct a final assessment of results and calculate actual ROMI and ROI. Gather all intermediate project data. Evaluate results primarily based on high-level metrics: customer count, profit, return on investments. This allows you to learn from the experience, accurately assess campaign quality, and optimize your strategy for the future.
Maya Leonova notes that when evaluating PR investments, consider:
Achievement of key financial indicators by the business.
Effectiveness of goal achievement and strategy implementation.
Return on PR investment.
Media metrics (cost per contact, reach, etc.).
HR metrics ("happiness index" of employees, time to close vacancies, employee engagement in brand promotion, and more)."
Tips for Calculating Investments in PR and Marketing: Use multiple metrics
Don't limit yourself to just one metric like ROI. Combine different metrics to get a more comprehensive view of campaign effectiveness.
Compare with previous periods: For a more objective assessment of effectiveness, compare current campaign results with data from previous periods.
Test and experiment: Don't be afraid to test different marketing approaches and experiment with new ideas. This helps find the most effective strategies for your business.
Consider the time factor: Investments in marketing and PR might not yield immediate results. Some campaigns require time to attract new customers and establish connections with the audience.
In conclusion, evaluating investments in marketing and PR is a key aspect of successful business development. It helps determine the effectiveness of advertising and PR campaigns and reveals the most promising strategies and tactics. Properly calculating investments allows companies to use resources most effectively and achieve their goals.
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