Every year, you should allocate a percentage of your top-line revenue to your marketing budget, which supports strategic efforts from your website to social media to search engine marketing and everything in between. So the million-dollar question is: what percentage of your top-line revenue do you allocate to your marketing budget, and how should you most effectively distribute your available funds?
Plan Your Marketing Budget
Of course, determining the right percentage for your company depends upon a few factors, including your current level of branding and recognition in your market (i.e. are you now building in new areas that you haven’t before, and are prospects meeting you for the first time?), your upcoming communities, etc. — but around 1-2% of your top-tine revenue is a sound benchmark for most builders in today’s digitally rich climate. When you go to plan your marketing budget for the upcoming year, consider these factors:
- What was your sales goal from the prior year? Did you hit it? How far off or over your goal were you?
- What was your average sales price?
- What is your sales goal for the coming year?
- Were there changes to your market this year or shifts that you can expect next year? (i.e. new competitors or shifts in absorption rates)
- Are there upcoming dates or events that will affect the lifecycle of one or several of your communities? (i.e. community close-outs and new communities coming online)
Distribute Your Funds
When it comes to distributing the funds of your overall marketing budget (which, as you know, should be around 1-2% of your top-line revenue), the key is to understand where exactly your traffic comes from. Short cut: we’ll tell you right now. Typically, around 80% of the traffic that comes to a homebuilder’s website originates from three main sources: organic content (SEO), paid search search (SEM), and social media. Therefore, your marketing budget should be weighted accordingly.
One area that builders often overlook when determining their budgets is content production. Think of this as your R&D line item, and that is exactly what you have to have. You have to be prepared to test new things that you don’t even know exist yet, as well as create fresh content (videos, professional photos, virtual walkthrough tours, written content).
This is something that has to be a part of your thought process. One of the things that we hear the most when we talk about content is: “we didn’t have that factored into our budget this year,” and the reality is that content should be at the top of your list of priorities in your overall spend. If you don’t have great content to show, you can’t have effective advertising — if you happen to get prospects to your website, but your website doesn’t have great content on it, they will leave.
Maintain Ongoing Analysis
Most importantly, as we mentioned above, these percentages are specific to each builder and depend upon several factors including market conditions, specific priorities, top-performing channels, competition, and timing.
Of course, coming up with a plan might seem like a daunting task at first, but it will prove its worth in the long run and help you better understand what’s working and what’s not. Most importantly, remember that your marketing budget isn’t a one-off task; it’s an ongoing process that needs to be monitored and refined throughout the year to ensure success.
When done correctly, your marketing budget will help bolster your sales — here’s to 2020!