Determining Your Jewelry Marketing BudgetLaryssa
You may have heard the phrase “You have to spend money to make money”, and that definitely applies to jewelry brands that want to increase market share and remain competitive in their respective categories. How much should you be spending on marketing your jewelry brand every year, and how should you be distributing that marketing budget across multiple marketing channels? In this blog post, we’ll help you plan your marketing spend in a strategic way.
Many jewelry entrepreneurs struggle to understand how much they should be setting aside for marketing, especially if they’re growing a new business and trying to increase brand awareness without any idea of how much revenue they’ll be making. To make matters more complicated, a jewelry business can determine its marketing budget in a number of different ways, and unfortunately no one-size-fits-all formula or solution exists.
What you’ll need to know first
Before you can determine your marketing budget, you’ll need to consider a number of factors. First, you’ll need to understand that how long you’ve been in business will affect your marketing spend. Are you a new company that desperately needs brand awareness, or are you a more established company that simply wants to stay top-of-mind with its audience? As a general rule, a newer jewelry brand will need to spend more on marketing than a well-known brand. Furthermore, your marketing spend may vary based on your business model. For example, B2C jewelry companies generally spend more on marketing than B2B jewelry companies. After you gauge your needs based on your current position in the marketplace and your business model, you’ll also want to calculate your gross revenue, which is the revenue your company receives before taxes or any other deductions. In some instances, your marketing budget will simply be a percentage of the gross revenue; in other instances, it will serve as a guide to help you set appropriate marketing goals.
Start-up jewelry business
If you’re a brand-new jewelry business without any sales history, then you may not even know your revenue. According to the U.S. Small Business Administration, businesses during the brand-building years spend much more than established businesses on marketing – up to 20% of their anticipated gross revenue. You’re probably wondering, “Where am I supposed to get the money if I’m not making any money?”
In some rare cases, a jewelry brand is able to receive outside funding, which they can use to support their marketing efforts. For example, the jewelry brand Mejuri raised $30 million in Series B funding in 2019, bringing the total investment in the company up to $38 million. It’s not clear what percentage of those funds they’ve used for marketing, but they’ve been able to invest some of that money in lucrative marketing efforts like influencer marketing, paid social media marketing campaigns, professional product and lifestyle photography, and more (Source). As a result, they’ve been able to grow at a rapid-fire pace.
If you’re not Mejuri, then you’re like most brand-new jewelry brands, and you need to establish a fixed marketing budget, which means you simply have to choose a number you feel comfortable spending and then scale from there. Regardless of the number you choose, you must commit that number to paper and then do your research to figure out how you can maximize your spend, so you can eventually increase your marketing budget in a strategic way.
Other new-to-market small business owners determine their marketing budget based on their short-term objectives. For example, if they know that a certain amount of money will help them promote their virtual trade show event, which will likely help them reach a monetary sales goal, then they will decide they feel comfortable spending that amount, since they feel confident they will profit from their one-time marketing investment. I tend to discourage this fly-by-the-seat-of-your-pants approach, since it doesn’t really support long-term planning, but it does work for “scrappy” new brands that are trying to make money they can reinvest into a more sustainable, long-term marketing budget.
Established jewelry business
If you run an established jewelry business with a fairly predictable annual revenue, then you have an advantage when it comes to planning your marketing budget. The SBA asserts that established small businesses with revenues less than $5 million should be dedicating 7 to 8% of their revenue to marketing and then distributing that budget across brand development and advertising costs. Brand development may refer to upgrading your ecommerce website, creating content for your blog and social media channels, updating your marketing videos, and more. Advertising costs may refer to the cost of Facebook or Google ads and the fee to have a professional manage those ads for you. These costs should also cover any tools or technologies you use to support your marketing efforts like your email marketing platform, your website hosting costs, your social media planning tools, and more.
These guidelines from the SBA assume that your business has profit margins in the range of 10 to 12%. To put that range into perspective, most fine jewelry brands far exceed that margin. A 2010 study conducted by National Jeweler showed that 45% percent of respondents said their margins were between 20 and 47 percent. A more recent study from INSTORE in 2018 showed that the average profit margin for jewelry brands is about 45%. Of course, the profit margin will vary based on your product category and specific business model. If you’re operating at a loss, then you should not use the SBA’s budgeting guidelines for your business. Instead, you should first focus on lowering your margins and spending more on marketing, so you can start making sales – and get out of the “red”.
Instead of following the percentage approach, some jewelry business owners simply try to determine how much their competitors are spending on marketing and then try to match that in an effort to “keep up with the Joneses” and not fall behind.
Distributing and updating your budget
To distribute your marketing budget, you’ll also want to consider all the ways you’ll be marketing throughout the year, which should be outlined in your marketing plan. Your chosen channels and tactics can include your social media presence, your email marketing campaigns, your photography, your digital advertising, your website, your SEO, and more. While it’s true that some of these things can be managed for free – like social media and SEO – you’ll still need to consider your time, any paid tools that are helping you optimize your processes, and any consulting fees you incur from professionals outside of your organization.
You should also know that your marketing budget isn’t necessarily fixed. For example, during the COVID-19 pandemic, many jewelry entrepreneurs cut back on their marketing budgets because they lost revenue or were feeling uncertain about the future. On the other hand, some jewelry entrepreneurs actually doubled down on their marketing spend during the COVID-19 pandemic because they realized they could increase market share while their competitors weren’t spending as much money on marketing.
Knowing how much to spend on marketing is just a small part of using your marketing budget effectively. In addition, you’ll want to spend that money in a strategic, thoughtful way and put it toward initiatives with the best return on investment. You’ll need to have both a sound marketing strategy and plan, and you’ll need to understand both your competitors and your customers. Even though hiring an experienced marketing consultant can eat into your marketing budget, that person’s knowledge and wisdom can help you save money in the long run because he or she can advise you on the best decisions for your brand.
Unfortunately, some jewelry business owners don’t understand the value of high-quality marketing, and they try to cut corners by hiring cheap service providers. However, “You don’t always get what you pay for, but you always pay for what you get”, as the saying goes. If you don’t spend your marketing budget wisely the first time, you’ll probably have to spend it again – and again.
Taking the time to track your marketing results and measuring the efficacy of your marketing will also help you understand the true value of your marketing budget. If you experience a stellar sales month, then you may want to evaluate what you did differently that month – and then invest more money into whatever that may be. If you had a dismal sales month, then you may want to pull back on the type of marketing that you were doing that month. At the same time, you do need to realize that your sales results aren’t necessarily a direct result of your marketing, since market fluctuations can also happen for other reasons. In addition, you should know that the results of some marketing tactics – especially influencer marketing – can be difficult to measure, so you have to feel comfortable with a small degree of uncertainty about your marketing spend. All in all, as long as you’re following a plan and making conservative decisions based on your business goals and realistic expectations, then you’re more than likely choosing the right marketing budget for your jewelry brand’s current situation.