BUILDING THE MARKETING BUDGET
I have a simple, straightforward, and ruthless rule to building marketing budgets.

The money spent on a marketing program must be significantly less than the money earned or saved from that program.

I deplore the notion of spending $25,000 on a program that provides $10,000 of value.

I deplore even more the notion of spending $25,000 on a program for which no measurable value has been established at all.

The traditional approach to marketing spending—that many of the most expensive programs, like branding and advertising and even public relations are ultimately cumulative in value and therefore can't be measured by standard business yardsticks—-is almost ingrained in us. The old John Wannamaker saw that "half my advertising is wasted, I just don't know which half" is almost considered a fact of marketing life.

I don't buy it. I say that every dollar your company spends on a marketing program must bring you a lot more than a dollar in return.

I say that marketing programs must pay their own way.

MARKETING IS BUSINESS NOT ART
As with any other business initiative, Marketing must have a business goal, and that goal must be trackable in business terms. A marketing program—any marketing program—must either make you money or save you money. If you can't set and measure a program by one of these two goals, don't do it.

Period.

We've been taught otherwise, haven't we? We've been taught that, while you can measure simple things like a direct mail campaign in terms of increased sales, the big ticket items can only be measured through market surveys, testing amorphous things like brand awareness audits, goodwill surveys and public opinion testing.

In my view, we've been taught the wrong thing.

Only by determining the ultimate financial value of a program can you determine how much to spend on it.

VALUE DRIVES FUNDING
This isn't easy. But it's essential. Essential to determining how much to spend on the program. Essential to measuring the success of the program as it is executed. And essential in deciding whether to continue funding it, modify it, or cut your losses and stop it.

And it can be done. For branding. Advertising. PR. Web presence. All of the things that we've been told are, ultimately, untrackable . . . ultimately simply a necessity of doing business.

I run into it all the time. As a client explains their current marketing situation to me, and we touch on this initiative or that, I'll ask "how much are you spending on it?" The answer is often large figures. And then I'll ask, "what kind of return are you getting from it?" And the answer there is a kind of sheepish smile, a look around the room at the other sheepish smiles, and a quiet . . . "I wish we knew."

What kind of answer am I looking for? How's this for an example:

"Our initial branding goal was to see a return, based on revenue and savings, of $25,000 per month. We allocated $8,000 per month on our branding initiatives. We've increased our qualified lead rate by 22% which nets to an 8% increase in sales, and we've cut our sales cycle by four days, which saves us a little under $3,000 for each closed deal which in turn allows us to handle 8% more leads in the same period of time. So for the $8,000 we spend we calculate (note: calculate not estimate) we're seeing between $18,000 and $22,000 per month in combined revenue increase and cost savings. It's sufficient to continue the program, but we're going to look into modifications to see if we can't hit our original goal without increasing budget."

That's what I'm going to talk about for the next few issues—how you can build budgets for significant marketing programs using the value of the program itself as the basis for that budget. I'll start with branding, and move on from there.

Want to weigh in? Click here to tell us what you think.

Want to receive these articles by email on the second and fourth Tuesday of every month? Give us your information here: