Frequently, companies underspend on their customer facing efforts. Oftentimes, they overspend trying to reach a target audience.
San Francisco, CA (PRWEB) May 31, 2016
Building a successful company involves marketing a product or service to a targeted customer audience. Frequently companies underspend on their customer facing efforts. Often they overspend trying to reach a target audience. For example, if the target audience is the older consumer, marketing money spent on social media may not be effective in reaching that audience.
One of the best ways to make sure that marketing money is well spent and effective is to develop a solid marketing plan. A strong marketing plan will ensure that cherished dollars are being spent wisely and appropriately.
What can a Marketing Plan do for a Growing Business?
A marketing plan includes everything from understanding the target market and the competitive position of the company in that market to how to intend the company's reach to a new market or to how to differentiate the company from the competition in order to make a sale.
Middle market companies marketing budgets should be a component of the marketing plan. Essentially, the plan will outline the costs of how the company is going to achieve the marketing goals within a certain timeframe.
Six Steps to Success
1. The Sales Funnel
Building an effective marketing budget requires a deep dive into the sales funnel, where results will be tacked throughout the revenue cycle, from prospect to customer. Harvesting this data from marketing automation software or Customer Relationship (CRM) systems makes this process relatively simple:
- How many site visits does the company have per month?
- How many leads is the process generating per month?
- How many of the leads convert to sales qualified leads (SQLs)?
- What is the cost of generating these SQLs? (e.g., website development, outsourced content creation, Pay-Per-Click, time spent by marketing and/or sales to nurture these leads, etc.)
- How many opportunities convert into proposals?
- How many of those opportunities close as new deals?
- What’s the typical value / revenue of a new deal?
2. Operational Costs
Next you’ll need to understand the company's operational costs:
- How much would it cost in time and labor to deliver contacts?
- Does the internal staff even have the additional bandwidth required for this work or will the company require additional headcount along with the related employee benefits costs?
- How much would it cost if the company hired an agency of record? The upfront costs will be higher than doing it in-house, but the results and return on investment could justify the additional expenditures.
- What are the costs of inaction? Be sure to calculate rapid changes in the marketplace and if the company can afford to reduce your market share in the face of current and future competition.
3. Set a Marketing Budget Based On Business Goals
A marketing budget should be a component of the marketing plan, outlining the costs of how the company is going to achieve the marketing goals within a certain timeframe.
- What are the business objectives for the quarter?
- What are the business objectives for the year? How about three years out?
- How many of those contacts need to be delivered to the sales team, based on their close rates, to impact revenue enough to achieve those objectives?
- How does the company set the marketing budget - Company Size, Growth Stage
- Is the company in a hyper-growth or planning mode
- It is common for small businesses with revenues less than $5 million to allocate 7-8% of their revenues to marketing, splitting that between brand development costs such as websites, blogs, sales collateral, and promotion costs, as well as campaigns, advertising, and events.
- Never base the marketing budget simply on what is left over after covering all other expenses.
4. Position Marketing as an Investment, Not a Cost
More often than not, marketing budgets descend from the top of the organization where marketing teams are considered cost centers and the marketing budget is perceived to be an expense.
By this thinking, organizations will look at last year’s marketing expenditures and make a decision about where they want to spend more or less. Instead, the marketing budget should be treated as an investment, something that will bring a quantifiable and ascertainable return on investment over time.
5. Consider the Growth Stage
Setting the marketing budget will also be influenced by whether the organization is in growth or planning mode.
If the company is in growth mode, the company will need to generate top-line revenue at a faster rate, so consider deeper investments in more of the quick-win marketing techniques.
- Take an iterative approach in further developing the website so the website can become central marketing hub rather than an online brochure. Iterative development and maintenance could consume a significant part of the budget, but the rewards are well worth it.
If the company is in more of a planning mode, where steady growth is more welcomed than spikes in revenue, the company will want to consider a longer-term marketing play through earned media. This includes generating and publishing great inbound content and eventually earning new business over time.
6. Understand Current and Future Trends
An understanding of current and future marketing trends can also help to navigate the budgeting process.
- When setting the marketing budget, it’s also important for marketers to adopt and apply different technologies to their marketing stack to keep up with the pace of industry changes. For example; email, offering contact insights, email tracking, and email scheduling for sales and marketing efforts.
Many times companies react to the latest “marketing” idea without validation and research that they will successfully reach their target market. A marketing budget should include traditional market approaches as well as the emerging social media market. Focus on the audience, what form of communication they are likely to respond to and the message to that audience.
Michael Evans is a Managing Partner at Newport Board Group