Expanding slightly on a previous article on creating marketing budgets based on revenue or conversions, there are a couple more perspectives we can address to help tie up the budget creation topic.
It’s no secret that I’m a proponent of creating marketing budgets using a combination of your past customer conversion numbers coupled with your revenue goals for the period (rather than your past income – look to the future). However, in an economy the likes of which we’re experiencing now, I completely understand how spending more money now on marketing in anticipation of how much income will result can seem like somewhat of a gamble. So long as you have enough historical data about the conversions of leads to customers, and the ROI for each customer type, then you’ll be OK (even if a bad quarter or two hits, which, let’s face it, is likely to happen). Don’t cut back on your marketing spend, just be smarter about it using all your marketing data.
One aspect I overlooked in the last article was to be aware of what your competition is up to. I’ve seen two different businesses suffer greatly because they were essentially forced out of view by the agressive marketing of their competition. The competition could most likely tell that these businesses were spending less on marketing, so by increasing theirs (the competition) within targeted channels, it became much, much more difficult for customers to find anyone BUT the businesses that were spending the most in that period. (Again: it’s not just spending. For every dollar you cut back, increase your viral and social efforts to try and compensate.)
Take this lesson to heart: keep an eye on your competition. If they spend more on marketing, you must be more active and creative, or else spend more as well so that you don’t get lost in the mix (especially for online marketing like PPC on search engines or PPC on social networks like facebook). You can also take advantage of the inverse: if you notice that your competition’s spending is going down, then that’s a window of opportunity to do more which will shift the ad impression frequency to your advantage. (That’s one of those, “It’s not personal, it’s business” sort of moves.)
OK… but that’s clearly something you cannot predict, right? How do you make a marketing budget that takes into account “the possibility” that your competition will change its spending or approach?
You must build in a fluidity to your larger marketing channel budget allocations (if not a completely separate discretionary aspect to your overall budget that you can apply to any channel as needed for special events, promotion pushes, competition marketing changes, or not use at all and carry over to next year).
Budget for the unexpected. Budget for the fact that your business is in a competition – because it is. You’re fighting with other businesses to get customers, so you cannot be rigid. They are out to get you! (OK, not you, but get your customers.) Design a marketing budget with some flexibility, and above all else – whether you make a marketing budget based on previous revenue, or forecasting revenue, or based on conversions and how many customers you want to get – keep an eye on your competition. If you’re patient, they will eventually reveal times when you can strike, so in order to do so, you need to be flexible and smart with your budget creation and its use.
