Budget for Marketing Communications
First, let me explain a very common approach to developing a marcom budget. Although we sometimes have to work within this approach, it s one that we feel is less than optimal. It involves the creation of a list of tactics; brochures, ads, web sites, etc., and the total cost of creating each. With this approach, you run the risk of dangerously under or over funding your effort. To us, it s more important to focus on a powerful and believable message than on a list of tactics that may or may not communicate in the most effective manner.
The budgeting process must begin with management. They should request a detailed marketing communications plan that outlines the basis for spending. It should explain how the budget was set, the competitive arena, the economic situation, and specific initiatives and objectives being supported. It should also outline the planned message strategies and the tactics to be used to carry them out.
So, the step-by-step process is as follows: Budget Message or Positioning Strategy Tactics.
Okay, let's consider the numbers. I like the percentage of sales approach. Using last years gross sales or this years projected gross sales as the starting point, you take a percentage of that number and assign it to the marketing communications effort. The percentage used will vary depending on your industry or your situation. One good place to start would be to consult your trade association to see what is normal for your industry. Generally speaking, the following percentages are used:
Automobile manufacturing: 2%-5%
Retail products: 2%
Service industry: 3%
Highly competitive consumer products: 8%-10%
But, there are variables to consider that might require you to spend more or allow you to spend less. For example:
Brand maturity: Is your brand new to the arena or very mature and widely known?
Competition: Is there a new or powerful competitor who is trying to kick your butt?
Change: Are you trying to change your brand position or grow market share?
Industry condition: Is your industry growing or shrinking?
The economy is also an important factor. It s very common for an organization to reduce the marcom budget in a slowing economy. I believe this is a perilous move. Companies that maintain a respectable effort are more likely to grow market share and will generally enjoy a quicker recovery when the economy improves. Keep up the fight.
What should be included in the marcom budget? I like to break it into two sections: advertising and sales promotion.
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