Many clients have asked me how much they should be budgeting for advertising and promotion?
My answer usually goes like this, “You need to spend whatever it takes to achieve your revenue goals on NEW programs and spend whatever it takes to maintain your EXISTING programs.” I can only get more specific if I know what each program is and work from the ground up, rather than just throw out 3% or 5%, which many businesses do just because it is easy.
Let’s say that you want to be very aggressive about building company parties and you are currently doing about $10,000 in this category. Your goal, you say is $50,000 – a five fold increase. Now what would you spend to get that $40,000 when you know that x% will be for food costs and x% will be for labor costs. Hypothetically, after I factor out these costs, I have $20,000 left.
What would you budget to meet your goals?
I still don’t have a good answer because I now have to examine who is my best target; (Fred’s theory of low hanging fruit) when would be the best time to market this product; and what are the most efficient ways to reach the target with MY message which is “a compelling offer.”
I now devise a plan to go after this segment in the September to December cycle and then again in the January to April Cycle. My media plan is to use direct mail postcards and letters as well as email and linked in. I have a data base of 1000 companies having more than 25 employees around me (in a 7 mile radius) and I am also able to discern who has had a party at the center and who hasn’t had one in the past year. (I’ll no doubt test some offers against current customers vs new customers and try different offers before full launch/roll out.)
Based upon this knowledge I sit down and figure out artist costs, postcard costs, direct mail costs, postage, telephone costs and some indirect labor costs. I total all these costs and come up with $5500. I set my budget at $6500, knowing that I will need to save some for “an opportunity.”
After the first flight of advertising goes out, I gauge my results and if I am ahead of or behind my budget. If I am ahead, I make no modifications, but if I am behind on my “yield”, then I must reduce my spending on the second flight (Jan to April) or develop some new tactics that are not as costly and proceed.
Adding more dollars to the second flight is like a gambler doubling down to recover his earlier losses. Unless the world changes or you have a revolutionary product, avoid the double down wherever possible
The budget for your “existing programs” is similar but different enough that you need to be aware of the subtleties. I’ll cover that next time.
Now I have simplified this process somewhat, but I wanted to demonstrate what a “real” budgeting process is and how one must go about it to be “On Plan”. And isn’t that what marketing is all about? Because if you don’t have a plan with real goals and strategies and tactics to back it up, you have as Paul Simon would say, “A winter’s day in a deep and dark December.”
Or you can just choose 3% and wing it 🙂
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