Tag Archive for Marketing Plan

How Much Do We Really Spend?

Most of what we read about marketing is about how to make the most of social networks or how to optimize something. While staying current with technology and using available resources to connect with your customers is very important, most marketers still are not spending a majority of their advertising budgets online, even if your reading tells you a different story.

Marketing Experiments shared some data published by Forrester Research that showed.

2009 2010 2011 2012 2013 2014
Total Interactive Marketing Spend (Mobile, Social, Email, Display, Search) In US$ Millions $25,577 $29,012 $34,077 $40,306 $47,378 $54,956
Percent of All Advertising Spending 12% 13% 15% 17% 19% 21%

Looking into the future, offline and traditional media, including direct mail, will still be a very important part of marketing strategy.

How Much Should You Spend?

Business Week published an article titled, “What Should You Spend on Advertising?” Instead of seeking a rational answer to the question, many just ignore it and hope it will go away.

Most emerging companies focus most of their time and talents on meeting the needs of customers, which is a great strategy. If they don’t take care of the customers they already have, everything else will go away. However, many neglect the function of winning customers in the first place. Others naively assume that if they simply provide excellent products or services, their reputation will precede them. Call it the “build a better mousetrap” syndrome. But the world has too many other things to do with its time than beat a path to your door. That means you need to structure your profit-and-loss statement in such a way that you can profitably allocate a reasonable percentage of your revenue to marketing.

The Big Question: How Much?

While there is no definitive answer as to how much any business should spend on marketing, there are general guidelines any company can use to develop a formula that works for them.

Your first step should be to try to find out what the advertising-to-sales ratio typically is in your field. Public companies in your industry may give a figure for their marketing spending in their financial statements (found in their annual reports). With a simple calculation, you can figure out what percentage of their overall revenue that represents. If you can’t find any public companies that seem similar enough to yours, you might want to start at 5% and then adjust your projected spending up or down based on the size of your market, the cost of media, what you can learn about how much your competitors are spending, and the speed at which you’d like to grow.

You’ll also need to ask yourself if your business is built to leverage volume or to leverage margin. Even within industries, there are differences in the marketing spend of volume-driven companies compared with margin-driven ones. Volume-driven companies tend to spend a tiny percentage of sales on marketing, in part because their large revenues enable small contributions to add up fast, and in part because of the margin pressures they face in having to compete with other high volume companies. By contrast, margin-driven companies tend to spend a larger percentage of sales on marketing: They have room in their margins to afford it, and they’re often working from a smaller revenue base.

The retail industry provides some good examples. While Wal-Mart might spend a meager 0.4% of sales on advertising, the sheer size of the company turns that tiny percentage into a significant budget. Wal-Mart’s nominally higher-margin competitor, Target, spends closer to 2% of its sales on advertising, while Best Buy, as a specialty retailer, spends upwards of 3%. Finally, more upscale stores like Macy’s typically spend close to 5%.

The same kind of ratios can be seen in the car industry (automakers’ generally spend 2.5% to 3.5% of revenue on marketing), liquor (5.5% to 7.5%), and packaged goods (4% to 10%).

If you’re in a services business, you might want to bump your starting point higher than 5%.

Marketing, Not Just Advertising

It’s important to make a qualification here. Giant consumer corporations such as automakers, packaged food manufacturers, and retail chains spend a huge percentage of their marketing dollars on paid media advertising, the most visible (and expensive) tool in the marketing toolbox. Depending on the size of your company and the business you’re in, advertising might not be the right (and certainly not the only) tool for you.

For a variety of reasons, media advertising might not be right for your company either, but direct mail, events, vehicle wraps, point-of-sale displays, or other tactics certainly could be.

The important thing is intentionally and deliberately to set aside some rational percentage of your sales to get out there. That way, the question you have to answer isn’t “How much should we spend?” but rather, “How do we spend most effectively?”

The Future of Marketing?

Is it really the economy, or is the recovery sluggish because people are not being reached when they want to consider marketing messages?

In a post that appeared on a Harvard Business Review blog, Dick Patton suggested that the four P’s of the traditional marketing mix (product, price, placement and promotion) be replaced. His article suggests a new acrostic: ROIDs

  • Responsibility marketing, including social responsibility, green marketing, and sustainability
  • Organizational leadership, requiring marketing to touch as much of the value chain as possible
  • Insights about customers, based on new analytic techniques that replace yesterday’s market research
  • Digital marketing, requiring companies to master an amorphous bundle of fast-changing media

What about the four D’s?

  • Dependability, as in marketing that is accountable, conscientious and responsible
  • Direction, marketing should be an integral part of determining where the company goes
  • Discernment, understanding of customers and the environment
  • Digital, companies must harness the power of ever-changing media, but be careful not to give it more influence than it deserves

Direct marketing needs to stay an integral part of this future; even as the environment, the rules, the models and what is really working and yielding results and returns on investment keep changing. Many businesses in many sectors have put more and more resources toward marketing using new technology, but the profits and revenue have not been created.

We need to talk to people when they want to receive information, not when they are in the middle of trying to just get through 50 emails or when they are gathering information for what they are ready to buy right now.

Five Marketing Steps

A refresher for some of you and perhaps a fresh outlook on some basics.

Step 1: Understand your customer

See other posts about segmentation and definition

Step 2: Create value for your customer

  • Focus on product or service features
  • Enhance the social skills of your employees
  • Use price as an additional customer value
  • Provide credit or payment terms to meet the needs of your customers
  • Enhance the image of your product, service or store
  • Provide service, before and after sale
  • Think of your location as another service for your customer
  • Present convenience
  • Set a mood with the atmosphere of your place of business

Step 3: Communicate your value to your target market

  • Everything you do communicates
  • Word of mouth is critical
  • You never get a second chance to make a first impression
  • Keep it simple

Step 4: Make it easy for the customer to buy

  • Set hours of operation that are convenient for customers
  • Make credit readily available
  • Select convenient locations (for retailers)
  • Find good retail outlets (for manufacturers)
  • Deliver products to customers in a reasonable and timely manner

Step 5: Create long term relationships

Creative Planning To Strengthen Your Marketing

Target Marketing Magazine included some great tips and considerations for creative planning as a part of suggestions for campaign planning meetings. We want to help you think about these as you plan your Direct Marketing.

The Offer

Remember, an offer can be a full-price product with special value.

  • Why was it created?
  • What problem will it solve for your customer?
  • What are we asking the customer to do?
  • What is the overall strategy?
  • What are the goals in terms of response rate or overall sales, and how is the offer going to help reach those goals?

The Audience

  • Who is getting this piece, and what is his relationship to your company? The message that you send to a customer should be drastically different from the message you send to a prospect, who may not even know who you are.
  • Think about the individual person behind the demographics. What will motivate him? What is his attitude toward what you are selling?
  • What key words can you use to speak directly to his needs?

The Brand

  • Your brand isn’t your logo; it’s the consumer’s perception of your company. How can you remind—or for a prospect, introduce—the recipient of your unique point of differentiation?
  • How can you prove that you are delivering on your brand promise?
  • What words and visual cues can you use to reiterate your brand?

The Format

  • What is the format, and why was it chosen? This is especially important to explore when using a solo package including multiple components. Explore each component, discussing the hierarchy of each piece.
  • Can the format be improved? Your production manager may be able to explain important options and opportunities as ideas are generated.

The Creative

  • What visuals will help grab attention and quickly explain your offer?
  • Where are the hot spots in your format, and how will you use them to your advantage?
  • How will you exploit an offer and make sure it is seen?
  • How many times will the offer be repeated and where?
  • How will the recipient process the piece—what will he look at first? If it’s a mailing, how will the envelope entice him to open it? If it’s a postcard or e-mail, how will you identify or introduce yourself at a glance and answer for the consumer, “What’s in it for me?”
  • What copy will intrigue the reader the most?
  • How much copy will be required and at what ratio to images?
  • How can you show value in every product? Is it necessary to include additional insets or callouts to showcase benefits?
  • Review the creative and production schedules: Who will work on the piece first; who will work on it second?
  • What is the proofing and editing process?
  • Together, create a list of must-haves: phone number, URL, fax and registered trademarks.
  • Are multiple versions necessary to accommodate different 
customer segments?

There is no guarantee that your project will run smoothly from beginning to end, but with the right planning—an understanding of the offer, audience, brand position, format and creative strategy —you have a head start. Take the time to talk through all of these points before the design process begins, and your program will generate better results.

Ideas to Define Your Brand

We have posted a few articles about branding and why it is so important in marketing. We thought it might be helpful to suggest some ideas to help you refine and define your brand.

What is a brand?

  • the outside view of the company, product or service.
  • the sum of all relationships between buyer and seller.
  • the most important asset that the organization owns.
  • the symbolic embodiment of all the information connected with a product or service.
  • the set of expectations associated with a product or service.
  • what leads customers to choose you over the competition.

Questions to get your thinking started

  1. What do your employees think sets your company apart?
  2. What is your company best at?
  3. What are your core strengths?
  4. What do you offer that one else offers?
  5. What do you love about your business?
  6. What makes your employees proud?
  7. Why has your company been able to stay in business when others have failed?
  8. If your company were to close, how would you want to be remembered?

Every contact or interaction with your customers and prospects is an opportunity for you to communicate your brand

  • Sign
  • Building
  • Letterhead and business cards
  • Packaging
  • Company vehicles
  • Staff attire
  • Advertising
  • Direct Mail
  • Web site

What do people (customers, prospects, audience) experience with your:

  • Product or service
  • Pricing
  • Customer service
  • Employee attitudes and actions
  • Atmosphere of your place of business
  • Role in the community

Now that you have a clearer idea of who you are and what you are all about, how can we help you share it? Direct Mail is a great way to reach the people who most want to hear from you.

Which Came First?

We did a study and analysis of our customers and sales over the last 14 years. We found a few surprises.

Even though we have a passion for helping new businesses get started and grow and love watching people realize their dreams. The average number of years that one of our customer organizations has been operating was almost 20 years. Are organizations more likely to spend more on direct mail the longer they are in business or are they still in business because they spend more money on direct mail?

The larger a company is in terms of employee size also correlated with average sales. In other words, the more employees that work in a firm, the more the firm spent on direct mail. Again you could ask did the organization grow because they used direct mail more or are they more likely to use direct mail because they have more employees?

Prepare For the Upturn

Many people are hurting and according to most experts it is going to take a long time for the employment rate to pick back up. However, just as it took a very long time for people to admit that our economy was not good, things may be better than we think.

In October of 2008 I looked at what was happening in the economy and tried to understand what many people were saying and why they said it. I looked at a history of recessions in the U. S. since the early 1900’s. Today I looked at the economy from the other perspective, focusing on the periods of growth and prosperity; believing that the glass is half full, not half empty.

I found details about the US Gross Domestic Growth Rate (GDP) going back to 1947. A negative GDP for two or more quarters is what defines a recession.

When I look at the chart I see:

  • Times have been good much more often than times have been bad
  • It looks like the worst is over and we are moving into another growth period
  • Perhaps the recent decline would not have hurt so much if growth in 2006 was not so big, I think we thought the good times would go on forever

What about your strategy right now? This is a great time to start cultivating new prospects. Get your name, your products, your solutions in your customers minds so that when they are ready to buy, you will come up on the short list. Think about sending mail.

Should you alter your marketing plan to prepare for the upturn?