It’s getting to be that time of year when we start to think about budgets and plans for the coming year. Will you have a marketing budget in 2011? Here are a few of the common ways I see marketing budgets being set.
No budget – this doesn’t mean they don’t spend money on marketing, they just don’t have a plan for how much to spend or what to spend it on. Marketing tends to be haphazard. One of the comments I often hear from this group is “we’ve tried a bunch of different things for marketing, but nothing seems to work”. I think this approach makes it very easy to fall victim to the “marketing idea of the week”’ syndrome.
Budget is x% of revenue – many businesses will set their marketing budget as some percent (5 – 15%) of revenue. While this approach is better than nothing, my experience is that companies employing this approach view marketing as a “necessary evil”. They “do marketing” because that’s what you are supposed to do but there isn’t a lot that is strategic about it.
Set your personal goals, then your business goals, then marketing goals to get your budget – after all, your business should support your personal goals. Your marketing plan is the blueprint for making that happen. The more closely you can tie your marketing goals to your personal goals, the more likely you are to achieve them.
Most owners that I speak with are looking to take their business or practice to the “next level” – they are usually better off setting a budget based upon their goals..
Cost to acquire – if you have had a marketing budget and a tracking system in place in previous years, you should have a good idea of how much you spend to acquire a new customer. So if it costs you $100 to acquire a new customer and you need 50 new customers to meet your goals, then you marketing budget is $5,000.
Things to consider
Do you know how much is a new customer worth to your business? This is an important number to know when determining what makes sense in terms of the amount you are willing to spend to acquire them.
Not all customers are equal. Some customers are more profitable than others. Do you know who your most profitable customers are? How can you find more customers just like them? Do you have marketing efforts specifically targeting those types of customers?
How do you go about setting your marketing budget? Don’t believe in marketing plans and budgets? Leave a comment and tell me why.
