Part 3 of the Series: Developing a Marketing Plan for Your Small Business
Budgeting is an important part of marketing planning. If you have a set budget, you’ll want to develop and measure the results of your marketing mix with the budget clearly in mind. If you don’t have a marketing budget, you’ll want to start by putting pen to paper on what you think you have to do to market your products or services and get sales.
Start with a list of what you think you need and the costs to do those things consistently and well. Remember the old adage, “If something is worth doing it’s worth doing right”? I can’t think of a better application than to marketing!
Example: If you’re going to do newspaper advertising, do it consistently long enough to find out whether it’s effective for you. The length may vary from a three months to half a year or more. Pay to have your ads professionally designed and plan a special promotion that you can drop into your ads to give prospects a sense of urgency to take action.
Continue to add marketing tactics that you think might work and their costs. Your preliminary plan might look like this:
Marketing Mix
Newspaper – 2 times/month for 4 months, cost = (advertising only, do not include artwork)
Co-Op advertising with partner/manufacturer – monthly for 12 months, cost =
Radio in x, y, z markets – morning drive time; daily for 6 weeks
Market x cost =
Market y cost =
Market z cost =
Email Specials – monthly 12 times, cost =
Email Newsletter – 4 times/year, cost =
Cost of Acquisition
Now determine the number of sales you need to get to consider your marketing successful. Be specific and realistic. Doubling your business is probably not realistic, and it doesn’t give a specific result for the individual tactics. How many new customers do you need to get from each tactic to make it worth the cost? The formulas you want to use are:
(Total cost) (Number of leads) Cost per Lead
(Total cost) (Number of Sales) CPA (Cost per Acquisition)
It’s important to calculate the number of leads as well as sales. This will tell you your “close rate”, which may differ from different marketing initiatives. It also provides insight into another important area in your business that you can also work to optimize.
Next, evaluate whether the cost of acquisition (CPA) is acceptable to you and individual tactics fit in your marketing mix going forward. If you are selling a product that brings you $1,000 a month in recurring revenue, you will likely be all right with spending $600 to get a new customer. But, if you’re selling something that is a one-time purchase, or doesn’t bring in as much revenue, you will need to adjust your acceptable CPA.
Return on Investment (ROI)
Ultimately, you will average the results from the individual tactics in your marketing mix to evaluate whether you’re getting the return on your investment that you need and whether you are hitting your acceptable CPA objective. By analyzing cost of acquisition as an average, you will be able to keep a tactic that may be a little more costly, but where you’re getting other benefits such as credibility or awareness.
Having an established CPA allows you to have a realistic marketing budget and plan your marketing mix accordingly. If I spend $x, I will get y results. If my budget is much lower than x or my sales goals are much higher than y, I can see before spending any money that I have to adjust something. If nothing else it tells me that I need to alert management that the budget or expectations may not be realistic, and you will need to test different marketing tactics to find the right mix.
Read Part 1: Brand, Positioning and Messaging
Read Part 2: Guerilla Marketing: Cost Effective and Powerful
