Business experts often call marketing the most important part of business. This might sound odd if you’re busy fixing a production problem or trying to attract investment. But you need to know who your customer is, and they need to know about your product before they can buy it. Marketing covers everything you do to:

• understand what customers want
• ensure your product or service fits the market
• connect the right customers to the right product or service.

Customer insights and understanding your industry are part of marketing. Research is a good starting point for everything else you do. It helps get your brand, prices, and promotion right.

Here’s how marketing contributes to key tasks.

• Build awareness of your business: Research where your customers get their information from, so you can promote your business in the right places. A good brand will help your business stand out from the crowd and make it easier for customers to find you. 

• Develop a new product or service: Research what customers need and what’s already available in the market. Then you can provide something that meets those needs and has a unique selling point when compared to competitors.
• Reach new customers: Research who are the most promising people to target. Your brand, product and promotion will help you reach them and encourage them to buy from you.
• Adapt to changing market or industry: 'Marketing activities can help you prepare for the future, as you’re able to review your products or services, and where and how you sell them. You may spot opportunities to change your sales channels or update an offering that’s lost its appeal.
• Stand out from your competitors: You may be struggling to stand out from the crowd. A brand refresh, effective pricing or emphasising unique product features could give you the edge you need to survive.

Marketing includes all the ways you can research who your customers are and how they behave when planning to buy what you sell. You should identify:

• how customers make decisions in general and when choosing what to buy
• the steps they follow before, during and after buying your product or service.

Splitting your customers into groups helps you target the right people and promote your business in a way that chimes with them. For example, you might group customers by age, sex, demographics, income, or anything else that makes sense for your product or service. Getting your targeting right helps save money by focusing on promotion that hits the mark.

Sales data and other business information can help you understand how valuable customers are to the business. You’ll want to know the cost of gaining each new customer, the profit each time they buy something, and the total profit over their lifetime as a customer.

What your customers want and how they think

Markets keep evolving. Keep an eye on your place in the market to stay ahead of your competition and adapt to changes, for example, new competitors or changing prices.

Did you use product, place, price, and promotion as a framework for understanding your marketing mix? You can use the same framework to review it, and see if your choices still stand up.

Understand your marketing mix

Look at how your business has changed. And how your existing competitors have changed, which competitors have joined or left the market, and anything else that could affect your position.

Check how you compare to rivals

Every product or service has its own profile of price, performance, and customisation. These characteristics define the position of the product or service in the market.

Different profiles can make two otherwise similar items appeal to different customers. And each item’s profile determines how it stacks up against competitors.

Creating your own space

A brand is something that distinguishes your business from your competitor’s. Every business has a brand, even the smallest sole trader or newest start-up. Marketing helps you understand what makes up your brand and its effect on winning and keeping customers. Then you can build the brand you want, one that shows customers why they want to buy from you. 

A strong brand can also be the key to getting finance and improving customer loyalty.

Build a brand your customers will love

A pricing strategy is a plan to set up the price of your products so that it appeals to your customers. The right pricing strategy is one that holds value for your business, your customers, and your collaborators. Your business should have the right pricing strategy to be profitable. It’s a key part of running a business and finding your position in the market. You need to know whether your product is more or less appealing than competing products, and how price-sensitive your customers are.

Insights like these help you understand which pricing strategy fits your business best. Too high a price can put customers off. But too low a price can hurt your bottom line even if it boosts sales.  Marketing helps you find the pricing sweet spot that works for you, your customers, and anyone else your business works with.

How to set the right price

Promotion is what most people think marketing is all about. But promotion is just the part of marketing that covers ways you share ideas about your product or service with customers. Examples include:

• talking with customers in store or online
• social media posts
• advertising on billboards or flyers
• discount coupons offered online or on letterbox leaflets.

The internet is changing how businesses promote themselves. It opens up new ways to find the right customers, and to communicate with them.

Find the best way to promote your business

Strengthening relationships with customers

Even if your finances are stretched, spending on well-planned marketing activities is a good idea. You can recover the cost through an improved profile and more sales.

Setting a marketing budget is a good way to ensure you set money aside for it. And with its own budget, marketing is less likely to be an afterthought.

Financial models: Step-by-step guide

Here are four popular ways to set your budget, and some pros and cons to be aware of.

Spend to achieve objectives

A great marketing plan needs to have objectives. Examples include:

• identify 200 potential customers
• show 300 people a video on social media
• give an introductory discount on the first 10 sales of a new product.

Once you know what you want to achieve, set a marketing budget to pay for it.

How to do it

Set up marketing objectives. Figure out tasks that will achieve these objectives, and then estimate the cost of those tasks. Your marketing budget needs to cover the total cost. For example, making a video might cost $500, and promoting it online to reach 300 target customers might cost an extra $60.

This is the most logical method of budgeting. You’ll have the money you need. And if the budget looks too steep, you can revise your targets.

Sales-based budget

Some businesses dedicate a percentage of current or forecast sales income to marketing. You can adjust the percentage depending on factors like how your business is performing, how’s the business environment etc. This method of budgeting is often highly recommended by business experts.

How to do it

One way is to allocate part of the revenue from each sale to pay for the promotion or other marketing that supports that sale.

This method shows a clear relationship between marketing budget, and selling price. It’s also helpful when you’re applying for funding or doing your accounts.

It doesn’t reveal how much you need to spend on marketing, even though everything depends on setting aside the right percentage. You might spend too little and fail to make the most of your marketing ideas, especially if your budget is based on business as usual sales.

Spend to match competitors

Some small businesses prefer to keep their marketing budget close to their competitors'.

How to do it

If you can work out roughly what your competitor spends on marketing, you could match this amount. Another option is to match the average for your industry, if stats are available.

Stats on marketing spend can be hard to find. Some businesses try to find out what multiple competitors spend, then work out an average. 

There’s no way to find out if your competitor is doing the right thing until it’s too late. What’s right for your competitor — or the average business in your industry — may not be right for you. You might have different ambitions for growing the business, or a different financial situation.

Stick to what feels affordable

Small businesses often set a marketing budget based on what the business can afford.

How to do it

Use part of your net profit (revenue minus operating expenses) for marketing. How much to set aside is up to you. 

This method often leads to underspending. For example, you set aside $200 of your net profit for social media marketing to gain new customers. But it costs $200 to create the ads, leaving no money in the budget to target the right people on social media.

Starting with a budget limit, rather than setting an objective, will affect the benefits you see. It may even waste the money you spend. For example, a discount offer may not boost sales if the price reduction is too small. An advertising campaign may not boost your profile if you can’t pay for enough people to see it. Poor results can make you reluctant to spend more, even if spending more is exactly what you need.