Subscribe in a readerIn my consultations and interviews with non-clients I often shock them by asking about their marketing budget. Usually I'm paid out of overhead, but without a marketing budget clients are grounded from implementing many of my suggestions. The common responses I get, for not having a clear marketing budget, may surprise you.
Top reasons my non-clients give for not having a marketing budget:
"That's what I pay sales people for ..."While I talk about the marketing-sales-service convergence in building customer relationships, marketing is not equal to sales. In many cases, marketing is what you do to before the sale and how you get customers to come back after the sale. If sales people are also doing marketing, then when are they actually selling?
"I believe in word-of-mouth ..."
Accepting something to be true isn't going to pay the bills without proof, in this case proof would be funds available for a marketing budget. Word-of-mouth works best when cultivated with regular customer contacts, referral systems, and an increasing customer base. Word-of-month is only one part of a well executed marketing program.
"I believe in community marketing ..."
Again, I believe in salvation but I still pay my bills because no one knows when the rapture is coming. Community marketing is another name for networking, and it has some value, however, if you don't have a marketing budget then how will you follow up all those contacts you are making.
"Just don't have the money ..."
At least this is an honest excuse, but leads me to think if they don't have the money for new customers, how much will they have available for my services (or serving existing customers). I'll share a few solutions to increase your available funds later in this report.
"It depends on how good it is ..."
If you could tell how good a marketing campaign would be before you implemented it, then why am I here. It's not my purpose to sell a client on a campaign, my only objective is to bring you new customers. That only happens through properly implemented marketing tests.
"I don't know what is available ..."
This is often true, the person I'm talking with doesn't know how much is budgeted. Some sales and marketing professionals get these same excuses from accounting or upper management. In other cases it's a blow off because I haven't yet established rapport.
"No funds are available for any new campaigns ..."
Now this is a legitimate excuse, it says they have a budget that is occupied. If they aren't talking with me about testing and looking at the productivity of their current spending then that is where I shift the conversation. This also could mean their budget is too small and doesn't give them any flexibility to seize an opportunity in their market.
Even if you only do word-of-mouth and community marketing you'll still need a marketing budget for follow up, customer retention, and related marketing materials. If your budget is too small, then you may not be able to respond to or expand profitable campaigns.
My regular clients understand the value of a real, set aside, marketing budget. Often times a fully funded marketing budget can turn a single consultation into months of profitable marketing campaigns. A marketing budget is your investment in future sales.
I'm suggesting no less than 15% target gross revenue, anything less increases time burdens which reduces available labor. For a small company this can be a disaster, keeping you stuck without growth. Worse, lack of a marketing budget may case whiplash incomes as you must stop to service accounts then start marketing from scratch each time.
What I usually find when a non-client insists on word-of-month and community marketing is that they don't have the resources to fund a marketing budget. When they leave marketing up to sales they lack lead generation programs. And, want to predict results before testing they often don't understand how marketing really works.
Now for the solutions. For a successful marketing program you need to have several marketing channels driving leads into your qualification funnel, which helps sales produce customers more regularly.
In addition to several front side funnels you'll want back-end campaigns to increase transaction size, up-sell or cross-sell, and maintain customer retention numbers. Both the front-end and back-end work together for long term profitability.
To get a marketing budget if you don't have one, you can increase your rates, skim off revenues a fixed percentage, lower you costs in other areas, test out existing campaigns, fund it by line of credit, or reduce costs some other way. The best solution is to do a little of each.
Without marketing budget you are forced to use slow manual labor.
By increasing your rates you'll get more from the work you already have, setting aside the increase for marketing helps reduce the manual labor side. Because most technical solutions (if you are selling value first) can take a 15 to 20% price bump, this is likely your most reliable place to find a marketing budget.
Less manual labor either means more billable hours, greater focus on selling activities, or time to focus on managing marketing campaigns. And, the increase number of leads generated from marketing campaigns plus more time focused on selling equals consistent growth.
In an expanded version of this report I can go over each of the other ways to make money available for a marketing budget. You are welcome to write in or fax your questions on the topic if you wish it covered sooner. The key is, if you want growth you must have a real marketing budget funding campaigns you can test.
These marketing campaigns can be supplementing your existing efforts with customer retention programs. These programs are designed to keep more of the customers you have, which reduces cost per sale while increasing customer lifetime value. Because you are testing you'll know which campaign works and which does not.
A refusal to setup a formal marketing budget, setting aside current revenue for future marketing, is actually lowering customer lifetime value, reducing customer retention, and unnecessarily handicapping your company. The next time we talk and I ask you about your marketing budget, tell me proudly you have one, it will govern what I can do for your company while giving you confidence to grow.
© 2009 Building Business Relationships, All rights reserved.
Justin Hitt helps clients transform average business interaction into profitable customer relationships so you grow year after year. For your consultation visit https://www.justinhitt.com/
By Justin Hitt at May 2, 2009 10:56 AM
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