It’s that time of year again. If you haven’t started on your 2008
marketing plan and budget, it’s time to pick up your planning tools.
Remember, good planning means fewer fires to put out later.

Whether this is your first time building a marketing plan or your
twentieth, before you get down to specifying tactics and programs, make
sure you have a solid grasp of your company’s strategy. Every decision
you make in preparing your marketing plan and budget should be in
support of executing your company’s strategy, so keep it in mind as you
define your marketing objectives and build your plan.

It’s that time of year again. If you haven’t started on your 2008 marketing plan and budget, it’s time to pick up your planning tools. Remember, good planning means fewer fires to put out later.

Whether this is your first time building a marketing plan or your twentieth, before you get down to specifying tactics and programs, make sure you have a solid grasp of your company’s strategy. Every decision you make in preparing your marketing plan and budget should be in support of executing your company’s strategy, so keep it in mind as you define your marketing objectives and build your plan.

Two Approaches to Creating a Marketing Plan and Budget
While there are a number of different ways to put together a marketing plan and budget, most of them are a variation on one of two budgeting approaches:

  1. Marketing budget as a percent of revenue — this approach allocates a percentage of expected revenue to marketing programs, which you then divide to meet your marketing objectives. For example, the budget could be two percent or it could be 10 percent of revenue. (Sorry, it’s unlikely to be 20 percent)
  2. Zero-based budgeting — with this approach you start with your marketing objectives and then define programs and tactics that enable you to achieve those objectives. Add up the costs of your programs and you have your budget. (Sorry, your budget will likely end up being lower than this total)

In either approach, notice that marketing objectives are the foundation. When you are defining your marketing objectives, think in terms of quantifiable statements that articulate what you want to achieve and when you want to achieve it. For example:

  • "Introduce Product X and achieve a seven percent market share in the first 12 months."
  • "Generate 20 qualified leads per month for Product Y."

Both of these objectives have a "what" and a "when." They don’t have a "how" — and that’s where marketing tactics and programs come in. What media and lead generation programs will you use to launch Product X? How will you generate leads for Product Y?

Whether you have three marketing objectives or 10, keep in mind these two points when building your marketing plan and budget:

  1. You must know your customers and prospects: their needs, their behaviors, how they gather information, how they make buying decisions, etc. For example, in the industrial sector, the vast majority of engineering, technical and industrial professionals go online to search for products and services. Therefore, you need a strong online presence for your company, products and services.
  2. You must always be marketing. While you may ramp up efforts around specific initiatives such as new product launches or entering new markets or geographies, you must maintain a level of marketing to give your company a pervasive and persistent presence in your target markets and to enable customers and prospects to always find you.

Now, which approach is right for you — marketing as a percent of sales or zero-based budgeting?

Marketing Budget as a Percentage of Revenue
This is the simpler of the approaches, because the budget is defined and your goal is to allocate it effectively. For example, if your revenue projection for 2008 is $10 million and four percent of that is allocated to marketing, your marketing budget is $400,000.

The tricky part is the percentage. Typically, a company will rely on its history of spending to help determine the appropriate percent. It may scale up or down based on objectives for the coming year or past results, but for the most part history will serve as a guide.

History will also serve as a guide for allocating among programs. If your Web site has been a lead generation machine, you will continue to invest in it. If you find that traditional marketing programs such as print advertising are delivering lower returns, you may allocate more of your budget to online programs where your customers and prospects are easier to reach.
Here are a few things to keep in mind when building a plan based on percent of revenue:

  • Break down larger numbers to smaller numbers by allocating slices of your budget pie to different marketing objectives.
  • Look at budget percentages by program type to see if the numbers make sense. For example, trade shows tend to be high cost when you include booth space, the booth itself, giveaways, travel and hotel, and people resources. What kind of exposure are you getting for your investment compared to, for instance, an e-mail marketing program or e-newsletter advertisement?
  • Using historical data, move dollars away from programs that underperformed and into programs that can offer more benefits.
  • Focus on programs and tactics that are measurable.

Zero-Sum Marketing
How comfortable are you with a blank slate? That’s what zero-sum marketing presents to you. You have your marketing objectives, now what programs and tactics will help you reach them?

Take the example objective above: "Generate 20 qualified leads per month for Product Y." The number 20 comes from the fact that your sales team historically closes one out of two qualified leads, which translates to 10 Product Y sales per month, which adds up to $50K/month in revenue at an average selling price of $5,000. It happens that $50K/month is the sales target for Product Y.

What programs will generate the 20 leads and how much will they cost? This too, is a numbers game. If one out of three inquiries becomes a qualified lead, then you need to generate 60 inquiries per month for Product Y to get 20 qualified leads and 10 sales. Evaluate a mix of GlobalSpec, e-mail marketing, pay-per-click and direct mail programs and estimate how many leads at what cost you will get from each program, then add it all up.

Perform a similar exercise for each marketing objective until you have covered all of them and built a marketing plan and budget.
Here are a few things to keep in mind when building a plan from zero-based budgeting:

  • Try calculating a "best case," "likely case" and "worst case" scenario for your marketing programs, with three different budgets. It will help you see all potential sides of a situation and give you information to makes changes as needed midstream.
  • Be realistic. Zero-based budgeting doesn’t mean you can spend freely. You probably have a general idea of what your company is willing to invest.
  • Allocate a greater percentage of budget to new products, markets or other new initiatives.
  • Remember your customers and prospects are searching for products and solutions online. You may want to move more of your marketing mix to online programs.

Remember, now is the time to get started. Don’t wait until 2008 is here to get your marketing plan and budget on the right track.

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