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I need a dollar, dollar, a dollar is what I need…for my marketing budget

I have yet to meet a marketing professional that doesn’t want or need an extra dollar for their budget. In today’s uncertain economic climate, cost-cutting initiatives are popping-up everywhere and this has many marketing professionals singing, “I need a dollar, dollar, a dollar is what I need.” Challenging times provide opportunities to reevaluate and learn. As marketing professionals, if we can’t get that extra dollar, we have to maximize the funds and resources we DO have. We need to become more effective, creative, and efficient. We need to look long and hard at what we are doing, how we are doing it, what can be eliminated, and how our current budget holds up. The key is to focus on those areas that will allow us to achieve our business goals.

In general, many companies will invest anywhere from 1%-10% of gross revenue, relative to sales volume, on their marketing budget. While you may or may not be able to affect this percentage, you can definitely decide how the funds will be invested. Here are a few steps you should follow to develop or optimize your marketing budget:

1. Identify marketing’s impact on the business objectives and how effective the marketing budget has been (use current, historical, competitive, or other data).

Based on the corporate infrastructure, culture, and business focus determine if marketing plays a driving or supporting role? If it plays a driving role invest in those activities that will directly impact the bottom line. These can include direct generation of: leads, sales, customers, subscribers, etc., or it can involve increasing: brand awareness, loyalty, or the customer base. In this instance you need to focus on areas that will “pull” in business. On the other hand, if marketing plays a supporting role you have to identify those activities, tools, or initiatives that will give your sales people or business partners the advantage they need. This can be in the form of events, activities, trainings, collateral materials, information, etc. By understanding marketing’s role you will know which areas to focus on. To measure the effectiveness of the budget you need to review what has been done in order to determine if you stay the course or make changes. If the corporate objective changes, the marketing budget must change accordingly. This may involve engaging in totally new marketing activities. If something has worked in the past, give it a new spin and make it fresh. If marketing plays a supporting role within the organization you may need to speak with other departments to get feedback and suggestions for new activities or initiatives.

2. Pinpoint which marketing activities provide the greatest returns and which are unnecessary.

Here is where you roll-up your sleeves and start getting dirty. You need to determine which activities have the greatest ROI. When evaluating be honest, humble, and objective. If you had a pet project that didn’t work out; don’t be afraid to eliminate it or put it aside. No sense in throwing good money after bad. Many times unsuccessful activities or projects take on a life of their own because people are afraid to admit they were wrong or their idea didn’t work. Remember that eliminating unnecessary items from the budget only gives you more funds for activities you do need. Keep in mind that ROI can be calculated using many different formulas depending on what you are trying to accomplish. Make sure your ROI calculation is in line with your objectives.

3. Focus on programs that can be measured and make sure the overall effectiveness of the budget can be evaluated based on objectives like: increasing sales, brand awareness, market share, product launches, attracting new customers, entering new markets, improving stakeholder relationships, enhancing customer relationships, increasing customer loyalty, etc.

Today’s marketing is all about metrics and analytics. Ensure your programs can be quantified to show their results. Many times people aren’t going to pay for what they can’t see. If a program can’t be measured it may be a candidate for elimination unless you can demonstrate its value some other way. For example, a sales incentive or end-user promotion can have direct results on sales but other activities, like an informational web site, social media posts, press releases, sales trainings, and others may not. Just because those activities don’t have a direct impact on the bottom line doesn’t mean they don’t play an important part role in your marketing mix. These activities may strengthen your brand, corporate image, and increase interactions with current or potential customers. By ensuring that your activities are quantifiable you are giving increased credibility to your marketing plan and strategies.

4. Create and test “what-if” scenarios to determine the effects of changes made to the marketing budget.

Business takes place in real life, not in a vacuum; therefore, we need to understand the effect one change can have on the overall results. For example, if the marketing budget is cut or increased by 5%, will the net result be a 5% increase or decrease in sales? We cannot assume that because we don’t know what affect that 5% will have. The final result can be greater or less than 5% depending on the areas affected. Make sure that when making any changes to the budget you take into account the consequences of those changes. For example, if you reduce your spending on sales trainings or collateral materials by 5% will the net result be a 5% decrease in sales or can it end up being greater? The same goes for an increase in web investment. Will a 5% budget increase generate a 5% (or greater) increase in sales? When running these scenarios you have to hone in on those areas that will have the greatest positive results and the least negative impact.

5. Make sure you have the people, process, and technology to implement the budget.

The last step is obvious but yet it’s one that is overlooked many times. A marketing budget can look greater on paper and can get people excited when presented but if you don’t have the resources to implement it, it has no practical value. I’ve seen many companies profess to be as successful as Apple, Samsung, Toyota, or Facebook and they proclaim to want to engage in many of the same marketing activities they do but unfortunately, at the end of the day, they don’t have the resources those other companies have. A cutting-edge ecommerce plan encompassing order taking, processing, fulfillment, and returns sounds great but it will stay just a plan if you don’t have the means to execute it, or pay for a third party to do it. You can include the latest CRM software in your marketing budget to generate and manage leads and customers but if you don’t have the resources to purchase or implement it, it won’t help your organization. If you scale your budget to your needs and infrastructure you will get the greatest return.

Now that we’ve gone through the steps of how to prepare or optimize your budget here are some tools that can help you get the most out of the process. The following is a list of some categories and activities to include in your marketing budget. Some may not apply to your situation and others may be missing. The purpose of this exercise is to get you thinking of everything you need to cover in your budget so as not to leave anything out.

  • Advertising
    • Pay-per-click
    • Lead generation
    • Email campaigns
    • Display ads
    • Magazine ads
    • Newspaper ads
    • TV ads
    • Radio ads
    • Social media ads

  • Branding
    • Software & hardware
    • Design
    • Stock photos & video
    • Corporate messaging
    • Collateral materials
    • Point-of-sales displays
    • Focus groups
    • Give-away items
    • Events

  • Website
    • Design
    • Development
    • Content management system
    • Ecommerce
    • Updates & maintenance
    • Integrations
    • Hosting
    • Third-party plug-ins/tools
    • Training

  • Content Marketing
    • Research, planning & design
    • Copywriting
    • Optimization
    • Stock video and imagery
    • Publishing tools
    • Monitoring tools
    • File management
    • Marketing automation
    • Webinars
    • Social media tools

  • Product Marketing
    • Research
    • Product design
    • Packaging design
    • Competitive analysis
    • Focus Groups
    • Product management
    • Launch events
    • Public relations
    • White papers
    • Product demos

  • Sales Promotions
    • Point-of-sales promotions
    • Contests
    • Rebates
    • Bundles
    • Incentives
    • Charities
    • Gifts
    • Cross-branding
    • Product trial period
    • Loyalty programs

Albert Del Rio
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