Whaddya Mean Lucky?

Fear and mystery surround every small-business marketing budget. The fear comes from spending good money on something widely perceived as an intangible. The mystery is that the owners of many companies know little about how these expenditures will impact their sales and profits.

It doesn’t have to be that way. By taking a systematic approach at the outset, you can allocate your marketing resources more intelligently and efficiently. You’ll get more bang for each buck, strengthen your competitive position, and enhance your bottom line. And there’s no downside.

The first step is deciding what you want to accomplish. That sounds like Planning 101. But few small companies do it well enough to earn a passing grade. Prioritized goals are the bedrock of budgeting. Without them you’re only throwing money in the general direction of your customers and hoping you get enough additional business to justify the expense. Compounding matters, you’ll have no way to measure whether your investment paid off or not. So when budget season rolls around again, you won’t be much wiser. That’s no way to build a business.

Granted, marketing is not science. Unless you’re using some computer- model-based approach like direct mail, you can’t confidently predict the exact ROI on every dollar. But clearly articulated goals will greatly improve your aim. The words “clearly articulated” are operative here. The more specific your objectives, the further your dollars will go. If you own a hip clothing store for young women, a goal “to sell more stuff” is less useful than saying that you aim “to increase traffic from high-school-age girls.” Ultimately they may amount to the same thing, but the second provides at least a hint of where the company will concentrate its energy and resources. Here are some other examples:

• As a new company, you need to establish your presence in the marketplace and quickly land new customers. Your goal: Generate as many sales leads as possible.

• One of your products isn’t selling as well as it should, but the competitor’s similar product is flying off the shelves. Your goal: Revive sales of the slumping product.
• You have attracted plenty of leads during the past year but haven’t turned many of them into paying customers. Your goal: “Harvest” those leads and maximize conversions.
• You’ve added a new product or service offering. Your goal: Build awareness within your existing client base.
• Customers come to you to solve a single problem and a single problem only, but go elsewhere for ongoing projects that you’re fully capable of handling. Your goal: Educate customers about what you can do. 

Chances are that your company has far more items on its marketing wish list than it can possibly afford. Clearly articulated objectives make it easy to balance competing needs and set priorities.

How much will it cost? That’s what every responsible CEO wants to know. But answers aren’t always simple or easy to come by. Budgeting is complicated by the fact that there are numerous tools and options available. Some of the most obvious marketing weapons at your disposal are website, brochures, advertising, promotions, trade shows, direct mail and e-mail.

The challenge is to find the most cost-fficient way to achieve a particular goal. For example, after some study you may conclude that since your best prospects are existing customers, you will spend most of your marketing funds to develop targeted email campaigns and enhancements to your website.
When developing a budget, beware of hidden costs. Even the simplest marketing effort can involve many tasks that add up to big bucks.  Among the items frequently overlooked or underestimated:  

• Research to identify your target audience.

• Development of a consistent marketing plan.
• Copywriting, graphic design and other creative services
• Media planning to cost-efficiently deliver your message.
• Techniques and tools to measure results
• Revising the plan based on feedback and changing priorities.
• Personnel costs for handling clerical and other tasks.

Crunching Numbers
How much do you budget? In a perfect world, you’d spend as much as necessary to meet your objectives. In this one, fiscal prudence governs. Many companies routinely set aside a fixed percentage of gross profits, adjusting that number by a few percentage points based on current circumstances. Start-ups or businesses that are running in the red are limited by available resources.

As you’d expect, companies expanding into new markets or planning major product launches tend to bulk up their budgets to build brand awareness and acquire clients. After the third year and beyond, after the “newness” wears off, they will re-assess their objectives to emphasize lead harvesting and allocate a smaller percentage of profits to the cause.

Year-to-year fluctuations in marketing allocations may look to outsiders like indecisive management, but it’s often a sign that management is agile enough to respond to changing conditions. Last year, a five-year-old midtown software company saw an opportunity in the fact that one of its products was far more popular than others. It figured that with a little more effort, it could achieve a rub-off effect. So it jacked up its marketing allocation to 8% of profits to finance a cross-promotion, an investment that it recouped several times over.  This year, with a new product in the lineup, it’s boosting the allocation to 20%.