Put Your Marketing Budget In Perspective
 By Patrick L. Wynne

You must have some standard to measure marketing success. Any number in isolation is meaningless.

One thousand dollars. There, what’s the significance of that? It’s impossible to say unless you know the context. One thousand dollars is huge if you’re talking about an hourly fee. It’s a pittance if you’re talking about a year’s income.

So how much should you spend on marketing? To answer that, you need context.

Percentages
Dedicating a certain percentage of revenue or profit to marketing is meaningless, unless you’ve determined what that money is intended to buy, and whether it will.

A million dollar marketing budget with no return is far inferior to a $1,000 budget that returns ten-fold.

Ultimately, the percentage return you seek should be determined by whether other activities, such as investing in new equipment, would bring you a better return on that money.

Before arbitrarily picking a target percentage, weigh how much of a positive return you need the marketing scheme to generate in order to make it more worthy than some other expenditure. Only then can you measure effectiveness.

Budget Increases
Should you bump up your marketing investment? If a Yellow Pages ad has worked well, should you spend even more on that effort next year?

These questions assume that you have already calculated what “works well” looks like in dollars and cents.

As with all marketing expenditures, the decision to increase this line item in the budget isn’t made in a vacuum. If other marketing efforts worked even better, which is to say generated a greater return on investment, perhaps you might choose to keep the Yellow Pages ad budget the same in the coming year. Or even cut it back in favor of increasing the others, despite the fact it “worked well.”

New Opportunities
Whatever the size of your marketing budget, it’s always a good idea to earmark something every year to test new waters.

The first call on your marketing dollar, of course, is to continue or to expand those strategies that have proven to generate profitable business. Don’t fall for the foolish advice that since marketing to existing customers has gone very well, you can afford to cut it back and spend those dollars elsewhere. You almost always should continue paying for what works well. Most likely success won’t continue on autopilot if you cut off funding.

Nevertheless, a segment of your overall marketing budget should be designated for things you haven’t tried yet.

One way to ensure you always have something to spend this way is to make a decision at the beginning of every year that the least profitable marketing efforts representing perhaps 5 percent or 10 percent of your overall budget will be discontinued the next year to free money up for investing in new opportunities.

When To Budget
How far in advance should a budget be projected? This is a decision almost as unique as your marketing plan itself.

That said, the fiscal year that your business operates on is probably the default period for budgeting for marketing. When all business activities operate within the same time frame it’s easier to weigh one against the other to determine which are more worthy of expansion, and which don’t measure up.

Don’t let this deter you, however, from a marketing plan that spans more than one fiscal year. Indeed, the general goals and major strategies of your marketing plan should span multiple years. If you’re changing your overall marketing approach annually, you may not be giving your plan a fair chance to succeed.

Budget Details
When plotting your marketing budget, don’t forget to provide for miscellany.

If a Web site is part of your marketing effort, have you provided for expenses like Web site updates and software upgrades, not just the monthly hosting fee? Do you have enough marketing money set aside to buy banner ads to promote your site on other Web sites? Did you forget to budget for the extra bandwidth required for visitors to download large files?

Marketing Help
Need help putting together a marketing plan and a marketing budget? The small-business consultants at ProTalk® are just a key stroke or phone call away. These experienced professionals offer AFS Members ideas and guidance for ramping up a marketing plan and developing a workable budget. Visit http://www.AFSwebsite.org to learn more.

(Posted December 2007)

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