When we first meet with a prospect, we use a comprehensive list of questions to discover their needs, goals and wishes. Often the list of wishes is full of creativity and aspirations that make a lot of sense, and it becomes our job to craft the best plan to bring them to fruition.
Once we have that, it’s not long before we ask the dreaded question…what’s your budget?
“A good marketing budget should always mirror the goals of the organization–no matter how aggressive or conservative they may be”.
In our experience, less than 5% of the time do we get an answer we can work with. Typically the company doesn’t know, and most times when they do have a number in mind, or on paper, it does not match up with either their goals or expectations.
As marketers, we are the ‘doctors’ who are trained to make the best recommendation possible. Our recommendations are based first on meeting the goals or objectives of the company. The budget is determined by those expectations. The problem is when we come back with a campaign that far exceeds the investment the advertiser was willing to make.
To try and get ahead of this, we often give clients a range, based on their goals that they can expect to allocate. To help clients better understand how we create a plan, you can ask yourself these questions:
1) Who are the customers you’re trying to reach through advertising and marketing?
2) What stage of business are you in? Do you need to attract new customers, or create
a strong brand that keeps the old ones coming back? What are your objectives?
3) How much do you think your competitors are spending on marketing?
4) How much have you spent in the past, and did you get results?
5) How much can you realistically spend?
That last bullet point can seem a bit overwhelming. As an industry standard, it’s good start with 10% of the projected gross income or go off of last year’s numbers. This amount may be more than you need to achieve a particular objective, but in the course of the year, if you’re able to allocate and commit to this amount, you should achieve the marketing goals you set out for.
If however you have highly aggressive goals and attempting to reach a very large market, any agency worth their weight should be able to tell you if your budget is in line to achieve those goals, or if you need to adjust them, which may include not only reducing your forecasts, but also extending the length of time you will require to accomplish those goals.
“Even in recessionary times, it is wise to keep the marketing budget intact. Yet, it’s often the first thing to be cut when times get rough. However, it’s been proven that cutting back on marketing will mean losing out on even more profits.”
The key point is the newer your brand or company, the more effort and thus corresponding budget you should allocate. A rocket trying to take-off, experiences the majority of its resistance when first trying to get off the ground. According to the SBA (in addition to other reputable studies) 70% of new firms with at least one employee survive for at least 2 years. About 50% go on for 5 years. Meaning half of all businesses fail within 5 years.
There are several key factors for business failure, and one that often is cited is that most companies allocate all of their money into the resources it takes to ‘open the doors’. But then once the doors are open, nobody knows they’re there.
Be realistic, marketing and advertising, even in the age of social media take time, and money, and professionals in many cases in order to reduce waste and maximize your budget. Being penny foolish and pound wise with your marketing and advertising budget has shuttered many companies both big and small.