[Smart Marketing] Market Planning: Chapter 2

Marketing, in the context of our industry, is the process of persuading a consumer to purchase service from your company. It begins with determining the answer to a very important question: How much are you prepared to invest in getting this done?

You can market your service without investing a great deal of money. You can literally "door-knock" your way to marketing success. This involves investing a great deal of time and using many of your human resources. If you’re not prepared to do this, then you’re going to need to invest some money. How much you invest in marketing your service(s) is a major consideration in how well you are going to do.

Throwing money at marketing is not, in and of itself, a guarantee of success. A number of factors influence marketing success or a lack thereof. And we’ll be discussing all of them in subsequent Smart Marketing columns. But for purposes of both brevity and clarity, let’s use this space at this time to consider the ways you can establish a marketing budget.

THINK AHEAD. Budgeting for marketing requires some strategic thinking. If you view marketing in tactical terms, you’re most likely doomed to fail. You shouldn’t market reactively and you shouldn’t market whimsically. Marketing should be planned and determining a budget is the essential first step.

There are essentially two ways to establish a marketing budget. The first and most practical way is to strategically dedicate a fixed percentage of gross revenues to marketing. In our industry, depending on variables like geography and seasonal issues, I’ve heard of numbers like 4 percent all the way up to 10 percent. The more you invest in marketing, the less you have for payroll, materials and supplies, vehicle expenses, general and administrative costs and profit. But if you don’t invest realistically in a marketing effort, chances are you’re not going to have to worry about those other things for long.

For the sake of this discussion, let’s say your business is generating $1 million in gross revenues each year. And let’s say, again, just for discussion, you invest 7 percent in marketing. That means you’re dedicating $70,000 in your marketing effort for the year. (Chances are you’re putting something into Yellow Page directory advertising already, so deduct that from the $70,000. Whatever is left is your "discretionary" marketing budget for the year.)

The other way to establish a marketing budget is the tactical or "SWEG" method. SWEG is an acronym for "Scientific Wild Eyed Guess," or something like that. I don’t suggest this as a way to establish a budget, since it’s usually determined after the fact (meaning after you’ve committed dollars to marketing activities without a strategic plan). It ends up translating into a percentage of revenues but it isn’t strategically, proactively generated and doesn’t set a true benchmark for ultimately determining the success or failure of the overall effort. It’s not a "How much will I invest?" question, it’s more of a "How much did I spend?" question.

The real danger in tactical marketing is that decisions are usually made based on emotion and whimsy, and not on sound strategic thinking.

CONCLUSION. At the end of the day, it’s best to set a budget in advance, and it’s even a good idea to know at least in broad terms specifically when, why and how you’re going to invest those dollars. You can always adjust up or down depending on how things are going during the year, but establishing a percent of revenue-based marketing budget, in advance of any actual spending, is the right way to begin.

Next month we’ll focus on demographics.

The author is senior vice president of Massey-Persons-Brinati Communications, a subsidiary of Massey Services Inc., Maitland, Fla.