Let Your Audience Be Your Guide

When it comes to putting your marketing dollars to their best use, consider your audience... and maybe your investment portfolio.

It’s that time of year again. The time of year when you sit down and take a good hard look at this year’s marketing budget, projected vs. actual, to decide what items you need to increase, decrease or leave as they are when forecasting for next year.

And...when it comes to specific categories, like many other small to medium-sized businesses, you may have a hard time trying to project your marketing dollars. Oh sure, you understand all too well that you need to market your products, skills and/or services. After all, marketing efforts have a direct effect on revenues. You’re just not sure how to arrive at a reliable budget figure or where to allocate these funds.

The truth is, there are many ways that small and mid-marketing companies determine a marketing budget. The following are a few - for better and for worse - which are used individually and collectively to come to consensus as to what the “magic number” should ultimately be:

• Percentage of revenue - the average is 2-8% of revenue, but this is highly dependent on the size of your company, the age of your company and your industry.
• Percentage of projected revenue - based on what you expect revenue to be next year.
• Percentage of sales - commonly used in larger companies, this method uses either a percentage of past sales or a fixed amount per unit cost, multiplied by the total number of units sold.
• What we spent last year - based on expenditures of the previous year.
• Other budgetary items - After you determine your operating costs, such as inventory, operations and production, whatever is left over flows into the “marketing bucket.”
• Your competition - The trick here is to figure out what they’re spending and then to increase your budget ever so slightly and hope your revenue increases ever so significantly!
• All Things “New” - Factoring new developments, such as acquisitions, expanded locations, new product/service introductions, or new capabilities that will need to be incorporated into your brand and supported with marketing.
• Roll of the Dice - While not recommended, a number of companies will expend marketing dollars literally “on the fly” if a cool marketing tactic catches their eye.
• The “So I can sleep at night” budget - Putting all metrics aside, you determine a budget level that is in line with your comfort level.

So...what if you take a look at your marketing spend from a different angle? Who are Your Audiences of Opportunity?

Take a look at the target audiences for your marketing communications efforts:

• Existing customers - of course you’re going to market to them, as you want them to keep coming back, hopefully for more - and to you, not your competitor.
• Referral sources - the gatekeepers to promising future prospects, who need to know that you care about them - you always want to be top of mind whenever they encounter a “referring opportunity.”
• Prospects - a bit further down the pipeline, but important to communicate to, especially if yours is a long sales cycle. They already know a bit about you and you know a bit about them. And…they’re called “prospects” for a reason!
• Untapped/ Unknowns - maybe you don’t know them and they don’t know you - but they may still need whatever you’re offering. But how much time, energy, effort and money do you really want to spend trolling uncharted waters?

Now that you’ve recognized your audiences of opportunity, how are you going to allocate your marketing dollars in each sector?

1. The “Ultra-Conservative” Approach

   

   The inverted pyramid is considered “safe.” You allocate most of your marketing spend to existing customers. They’re the ones you want to stay “top of mind” with and they usually remain loyal. Plus, as they already have placed business with you, a trust factor exists, one that will be fundamentally more open to new solutions and expanded opportunities to augment a relationship with your business.

   Remaining marketing dollars are spent on your other key targets, in decreasing percentages, because while you want to “touch” all of them, you also want the most ROI.

2. The “Aggressive” Approach

   

   Take the Ultra-Conservative approach and flip it upside-down and you have the aggressive approach. You’re still allocating portions of your effort to the important “core” of customers, referral sources and prospects, but with greater emphasis on the Untapped/Unknowns, hoping to become a “known” and win over new business.

   Think of email marketing using a purchased list. Your message, if it gets delivered at all, can end up in the recipient’s spam folder where it’s either deleted or read. Of course, you’d hope for the latter and a chance at converting an “unknown” to an existing customer. But, only time and careful analysis will tell.

3. The “Moderate” Approach

   

   This is probably the most common allocation of marketing dollars: one-fourth of your spend across the four target audiences. It’s not ultra conservative and it’s certainly not too risky. It touches each sector of your audience with the same consistency of coverage.

In Closing

In closing, let the audience be your guide for determining your marketing budget and allocations. In doing so, you take your company and brand one step closer to being a true customer-centric organization. Remember, your audiences don’t wake up every day thinking about you; but you’d better wake up every day thinking about them.