Plan: Determine Your 2009 Marketing Budget
Going into a new year, many of our clients ask how to determine what to spend on their marketing. While everyone would like a hard number or specific percentage of revenue as a rule of thumb, Xsellerate asserts that what you spend on marketing depends on a variety of factors far beyond the current size of your business and your future revenue goals.
Perhaps instead of asking “How much should I spend on marketing next year?” ask “What drives my budget?” Do you want to make budgetary decisions based on a percentage of sales, a rule of thumb, what you did in the past, or your marketing plan? The following set of common business planning questions will help you build a set of guidelines to plan your marketing and reach your goals. Then you can align your costs and investment to the plan.
1. Are you trying to grow your business or remain flat next year? There is nothing wrong with choosing to remain flat or acknowledging that you do not see growth opportunities in your market. This does not, however, mean you should stop marketing. You want to maintain your presence, retain your current customers and continue to refresh your base to offset any client attrition.
2. What percentage of this year’s budget did you invest in marketing and what were the results?
- Did revenue increase, decrease, or stay the same?
- Did you increase the number of relationships and prospects in your pipeline?
Certainly, looking backward is not a planning strategy. However, evaluating past efforts, expenditures, successes and failures is a first step in moving forward with new plans. This is especially crucial if you do not have primary market research on your business and services.
3. At what rate do you convert relationships to prospects and prospects to clients? How does that rate compare to previous years? If you invested in marketing and your conversion rate increased, then you are seeing results! If you invested in marketing and your conversion rate decreased, then you need to reconsider whether you are targeting the right people with the right message.
4. What is your typical sales cycle? In an organization with a 12 to 18 month sales cycle, it will take a lot of patience to see results from marketing efforts. However, if you expect to see results from just a few marketing initiatives and lose patience before you build up a healthy, ongoing mix of activities and communication channels, you may find a cash flow and pipeline shortfall a year from now. Cutting marketing overhead could cost you revenue you cannot quickly restore. In addition, when you recognize a pipeline problem and try to rush campaigns to market, you will most likely incur higher marketing expenditures.
5. Has the cost of doing business gone up? While The Fed has managed to control inflation with interest rate cuts, the escalating cost of doing business is having a serious impact on day-to-day operations. It is costing you more to keep the lights on, put paper in the printer, and maintain health insurance for your employees. It’s also costing your vendors more, and they are going to pass those costs on to you. In effect, maintaining a flat marketing budget amounts to a budget cut: you can do less and reach fewer people with the same amount of money, which could put your company’s income at risk.
6. Which marketing activities will go into your plan this year? You may save marketing dollars by cutting back on aspects of your campaigns, but at what cost to your results, conversion rates, and overall revenue? Marketers all over the world have proven that you need to reach people six to eight times through multiple communication channels before they will take an action. When you skimp on a channel or an outreach tactic, you will miss individuals who need your services, but do not even know you exist because they overlooked your direct mail campaign, or couldn’t find your website when they searched by keywords you never optimized on your website.
7. What are your competitors doing? If you have successful competitors who you never see actively competing against you for projects and contracts, they are playing in deals where you don’t even have a seat at the table. This means they are reaching leads not on your radar. Their marketing budget most likely outweighs yours and you are losing customers to the competition!
The most successful marketing plans are strategic—they integrate goals from across the organization and take into account factors about your business, your market, and the economy in which you operate. By defining the company’s needs, planning to meet goals, and then budgeting to the plan, you can expect better marketing results.