Marketing ABCs: Investing in success: creating a marketing budget

By Lana O'Hollaren
Special to the coastal Point

Wise business people know that none of these attitudes is likely to result in marketing success.

So how do you establish a marketing budget? Let’s take it one step at a time. Before we continue, ask yourself this question: “Do I view marketing as nothing more than a pesky line item in the budget?” If you answered yes, you need an attitude adjustment. Nothing personal, but you need to understand that marketing is an investment in the success of your business.

If you spend lavishly on marketing, are you guaranteed success? No, but with very few exceptions, it’s probably safe to say that without appropriating money to your marketing effort your chances for growth and success are limited at best.

OK, so how do you establish a marketing budget?

There are a variety of conventional formulas that are used to build marketing budgets. Some are based on a percentage of sales revenues; others focus on customer acquisition costs or cost per sale. Each of these methods will provide you with a number for your marketing budget based on past sales. Eventually they all lead to the same formula: If you have X number of dollars to spend on marketing, what marketing can you afford?

Let’s take a different and, I would argue, more strategic approach to creating a marketing budget. Forget the traditional methods. Forget anything that’s based on sales revenues. In an earlier article, I talked about the importance of gathering knowledge about your customers. Well, it’s time to put that knowledge to work for you.

To create a strategic marketing budget start by asking yourself these simple questions:

(1) Whom do I need to reach?

(2) How often do I have to reach them?

(3) What marketing mix will allow me to have an impact?

(4) How much will that cost?

If you can allocate the funds you identified in your answer to No. 4, that’s your marketing budget. For example, let’s say you want to reach all women within a certain geographical area between the ages of 20 and 35. You determine that a marketing mix (more on how to develop an effective marketing mix in a future column) with the biggest bang for your audience will include a series of print ads, two on-site events, a flight of television and radio commercials, and a referral promotion. If you can finance this broad campaign, then you’ve established your marketing budget.

If you can’t finance your dream marketing plan (very few businesses can), don’t panic. You can still develop a solid, effective marketing budget.

You may simply need to rethink and adjust the answer to number one. In other words, you may need to narrow the scope of your audience. Is there a subset within that group that will help your market share grow?

If you sell premium household cleaners, for example, wouldn’t your marketing efforts be more efficient and less wasteful if you could market to the people who are most likely to buy your product?

So the question becomes: “What will it cost to reach young women, ages 20 to 35, who do their own house cleaning to save money but are willing to pay a premium price for the best brand?” Sure, it may take more work to peel the layers back so you can get to this very specific audience, but once you do you’ll have access to a very ripe audience that’s ready to buy. And you can choose your marketing mix to target that audience.

Rather than taking a conventional approach, which asks, “How much marketing can I afford with X number of dollars,” this method forces you to clearly identify your audience and build an effective and efficient plan to reach that audience.

That’s a solid investment.