Get Your Black Belt in Marketing by Ali Pervez

Author:Ali Pervez
Language: eng
Format: epub
ISBN: 9781614483656
Publisher: Morgan James Publishing

MOVE 31

Know how to calculate a marketing budget

MOVE 31

Know how to calculate a marketing budget

How much should you spend on marketing? Before I show you how black belt marketers calculate a marking budget, let’s study how it is often done today.

Small companies usually have no marketing budget and rely solely on existing customers for repeat business and referrals. Most of them do not have a formal referral system, so referrals are by chance. They happen sporadically. Location and signage is a major revenue generator. If these businesses have any leftover money, they may do a mailing. If an advertising agency makes them an offer, they may take advantage of it. They forget that most people who sell advertising space have little interest in making you money or making you successful.

For most small companies, there is no plan, strategy, or formalized marketing budget. These businesses believe revenue generation is uncontrollable. Customers just turn up. Most of their time is spent developing or making the product or service, with little or no attention to marketing.

Most small businesses operate in a reactionary mode. They have no idea why customers buy, but are happy they do! Customer traffic is similar to the weather; sometimes it’s sunny, and other days it rains. Sales are highly unpredictable. Ask these businesses what they can do to improve sales, and they may say, “There is nothing we can do. It’s the economy.”

Most small companies have spent money on marketing in the past and found no return, so why should they bother? They have not yet been introduced to the world of black belt marketing.

Medium-sized companies usually have a budget set by the person in charge of marketing. The marketing director is told the sales target, and he guesses what marketing expenditure is required to hit the sales goal. The budget is mainly focused on the cost to acquire new customers. Usually, little thought goes into making the marketing budget. To arrive at the budget, these companies may take last year’s budget and multiply it by the sales growth desired.

Most medium-size companies will allocate a fixed amount of funds, and the marketing director works within these to develop marketing programs. He will use historic figures to determine how to allocate the funds to different programs. What lift did the company receive in doing certain activities, and what sales were generated? This marketing system is a notch higher than the small business owner’s system.

Large companies usually allocate a percentage of sales to SG&A (sales, general and administration). This amount is usually based on what the competition is doing. Financial reports are studied. SG&A can be up to 30 percent of the sales revenue. This means that these large companies are prepared to spend thirty cents of every dollar in revenue to get the sale. They know marketing is important. Most of the folks who run large corporate marketing departments are MBAs who have made the connection between marketing and sales.

Unfortunately, marketing is not mentioned in SG&A annual reports. They just call it selling, general and administration.

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