So, you’re approaching the season of most businesses financial calendar’s calling for the reflection, review and planning for your year-end budgeting. If you’re like many companies, this means pouring over financials, projections, estimates, forecasts, facts, and figures to basically determine where your revenue came from, what your expenses where and how those numbers might need to look for the next financial term in order to meet your company’s goals and objectives. If your company is large enough, you may have a CFO or accountant that can have all this information available for review. If you have a smaller business, that person may in fact be you. Whatever the case, businesses periodically need to evaluate, measure, and plan for their financial “playbook.”
Without argument, revenue is “KING” within most “for profit” companies, but how those dollars are actually acquired and attributed will vary from company to company. A presumption within this article assumes your company understands the importance of a sound strategic marketing plan. With that said, I’ll provide an overview to consider on how YOUR company might approach investing in their marketing activities. While there are many views, “black-box” theories, and opinions determining how capital should be earmarked toward “marketing”, I will furnish a reasonable, quantifiable, and streamlined interpretation of how you could arrive at what your bottom line investment should be.
Past results – Future Goals – Market Research – Marketing Strategy
Objective and Task Budget Method
Before any true marketing activities can produce results, it would be very wise to establish some realistic goals and objectives and invest in quality marketing research. Good market research should precede any changes or additions to your existing efforts. This is where many companies short themselves and get off to the wrong start by “thinking” they know all there is to know about their customers; who they are, what they want, where and when they like to buy…..the customer journey.
Another common error – implementing a promotional activity (social media, digital advertising, video messaging, etc.) as the key to their growth strategy. To be clear, these items are extremely valuable tools to help grow a business, but it’s often misdirected as a one-size-fits-all approach. Invariably, most new clients start the marketing discussions with “we’d like to grow our business and customer base” or something similar. With the goal of “growing my business” as a starting point, most companies guess as to what messages and channels will be most effective in reaching this desired result.
My first question- “tell me what you know about your current customers and target markets.” Few have sufficient knowledge to really move forward to the next steps of the process. Good research will take into account what the challenges and objectives are and the types of research data and information needed.
Let’s assume you have taken the time to gather the requisite marketing research data. It is now time to craft what your marketing strategy needs to accomplish (from goals and objectives) based on the findings of your research data. This is where an experienced marketer can make it rain. The combination of market data and your goals should provide some insights towards which types of marketing assets, activities, and programs to consider. The takeaways from any such strategy should be actionable and measureable. While there are many different scenarios when considering goals, challenges and objectives, the following methodology will work well as an overview when establishing your marketing budget.
The first critical piece of information, what is the value of a new customer, i.e., how much revenue does a new customer bring to the bottom line? Equally important, is to determine customer Lifetime Value (LTV). These are extremely important metrics when determining your investment in marketing strategies for revenue goals and customer growth. For example, your average customer spends $500 buying your product or service. Assuming you have a budgeted revenue goal of $100,000, you would need to acquire 2,000 new customers, which will need to be generated from your marketing strategy. In this example, your marketing plan (and marketer) should have lead generation and retention strategies built-in, which will support the targeted growth objective. That’s the science part of it. If your company’s product or service is more geared toward reselling, upselling or cross-selling opportunities, then a more robust retention strategy will be needed.
A second critical piece of information is an understanding of how best to reach your market through the appropriate media channels and the necessary frequency required to meet your growth targets. This will require a significant amount of data and an experienced marketing strategist to set the optimal media with the appropriate reach and frequency. With the thousands of media choices available, getting the right mix of outlets is critical to effectively reaching your market with the right message. Once this information is assimilated, you should arrive at what amount of investment will be needed to reach your goals (based on your researched balance of marketing initiatives). Assuming you have gained some meaningful insights acquired from marketing research, it is determined your demographic will engage best from certain social media channels and a new promotional message and email/retargeting campaign. From here, you should be able to estimate the amount of investment needed to achieve your goal of 2,000 new customers. Of course, this number becomes more qualified if you know your conversion rates. The objective and task method will provide guidance to what the right amount of marketing (task) should be for a given situation (objective), while easily determining your ROI.
Knowing your objectives and identifying the tasks needed to reach them will help you set a budget that will move your company toward optimal growth. Setting a well-planned marketing budget is critical to a successful marketing strategy as there are many variables to consider and important information to gather. Strategize for success!
Authored by Derek Duhame, CMO/COO – Impact Strategic Marketing Insights
*Look for the next article in this series which will cover some additional ways to sensibly budget and plan for your marketing strategy.
For more information on marketing strategy or budgeting, contact Impact – www.impactmarketinginsights.com. Or call for a consultation, (770) 375-7594.