Building a Marketing Budget
By Ellen Fruchtman, President
Yes, it’s the end of February, and for those planners out there, you should already have your 2019 budget finalized. But, I have a sneaky suspicion many of you are still going by the seat of your pants with zero strategies and no rhyme or reason as to what you should do and why. For those of you, perhaps this will help you get that ball rolling. It’s sort of like an old pinball machine. The path that silver ball may take can make the difference between a high-scoring game or “game over”. And, today, the stakes couldn’t be higher. Follow these basic rules and the odds can be tilted in your favor.
Rule #1: Define your marketing goals
Beyond being profitable (isn’t that every business owner’s goal?), you need to think about the weaknesses you are facing as a company and where you want to build the additional business. For example, your first-time engagement ring business may be hovering at 20-25%. If you want to increase that number to 35%, then marketing bridal is a goal. Do you have an issue with aging inventory? Then having some sort of marketing mechanism to help you reduce inventory is another goal. You get the picture. To be effective, however, I suggest you not try to have a list of 20 goals. I would suggest you make a list of no more than 4-6 and you list those in order of importance. You may only have the dollars to effectively work on 2. And, that’s okay.
Rule #2: Determine your annual budget
I can’t tell you how many retailers tell us they have no idea what to spend. The general rule of thumb: 5% – 8% of gross sales. Now how do you determine if you’re 5% or 8%? That is all dependent on several parameters. Are you in a competitive market? Are you in an expensive market? Are you relatively new? Are you looking to change perceptions? Are you in a high or low traffic area? All of these need to weigh into that decision. We like to keep our clients around 6% on average. So, I would start with that number. If you don’t have the dollars, then you simply need to temper expectations or choose 1-2 goals you want to achieve that year. The bottom line is, whatever you do, you need to do it well. Push one category forward. Become more profitable and the dollars can be invested in tackling then next goal(s) in 2020.
Rule #3: Review your monthly sales numbers
Take your previous 4 years and create a spreadsheet of your sales for each month. Create a column that shows you the average sale each month for those last 4 years. Make a note of anomalies. For example, did you sell a $100,000 ring one month one year? That will skew the numbers. Then assign a percentage to each month based on those averages. For example, January may only represent 7% of your sales for the year. June may represent 16%. Those percentages should probably look close to how you are allocating the dollars each month. Now, this part is a little tricky when it comes to Bridal. Because we know that customer is in the funnel searching around for approximately 4 months prior to the purchase. So, if bridal is important to you, and you are allocating 50% of your budget to market to this segment, you will want to remain as consistent as you can be each and every month.
The notion you should only market during Valentine’s Day, Mother’s Day and the Holidays must go out the window. It’s completely archaic. There’s an opportunity to sell each and every day of each and every month. Should your dollars be pumped up a little for the holidays? Yes. But, it’s our theory they remain as consistent as they can be.
Rule #4: Consider your marketing channel options
This is where it starts to get tricky. And, where you need to consider what you know and what you don’t know. And, I suspect what you don’t know will outweigh what you do know in today’s marketing world. The number of marketing channels is enormous. Deciding what will be the most effective for you might take professional help. This is by no means self-serving. But, the truth is that it’s so complicated out there, is it really in your best financial interest to spend the time it takes to decide where those hard-earned dollars should be spent? Or is it more prudent to rely on someone who does this for a living? My bet is that you will always do better by working with an outside company. You will actually save money by doing so. And, by not doing this, you are being penny wise and pound foolish. Hell, I don’t know the first thing about changing my watch battery and nor do I want to risk doing it. Perhaps you should look at marketing the same way.
Rule #5: Consider what you’ve done prior
What worked? What didn’t work? What would you do differently? You should be measuring each event you do. Have you seen new faces from the non-profit organization you are sponsoring? If not, after 5 years of giving them $10,000 to sponsor their big event, perhaps you should reconsider. Everyone asks how do you measure marketing effectiveness? Well, unless it’s a call to action to ask for something; bringing in something; or showing something on sale and a person asks for that particular product, it gets a little more complicated. Digital is certainly easy to track. If you are doing Paid Search (and you should be), we can see actual clicks to your site; where people have been; how many people have commented, liked, or shared something on Social Media. But, none of this means they walked in your store and actually purchased something! So, although you can see this type of measurement, it’s not very far away from traditional media. It’s all about impressions. Where your name has appeared; how often someone sees it; and then you hope when they are in the market, you are top-of-mind. The bottom line: You need to measure the number of new customers coming through your door each and every month. Asking them where they heard of you is great to do, but also can be challenging. We’ve had customers say they saw the retailer on TV when they were never on TV. So, do take some of this with a grain of salt.
Rule #6: Think about what percentage should go to acquisition versus retention
Your budget will most likely need to address both new customers and what initiatives will increase the frequency of visit and actually keep that existing customer a customer. When you think about what it cost you to actually acquire a customer, the easiest ROI is getting that customer back in. If they had a good experience, that should be no problem! But, that requires constant contact with this customer, through emails, events, special parties etc. Acquisition is the advertising. And, although it’s true your existing customer is also reminded of you when they see your ads, it’s this form of marketing that will probably cost you the greatest dollars. Acquisition, however, is the lifeblood of retail. And, considering those great Boomer customers are moving or realizing they had enough, this will be your most important endeavor. And, I suspect approximately 60% of your budget will be weighted in this area.
Now comes the tedious chore of allocating those dollars. There are many budgets you can find online to model yours after. A simple excel document might do the trick. Or, perhaps you have another method in mind. This will, and can, take hours upon days to do. I also suggest you leave a marketing slush to cover items or opportunities that might arise. Because the plan should be fluid. This isn’t the fun stuff. But, it’s the stuff successful businesses are built on. Remember, marketing is not an exact science. It requires patience, consistency of message, trial and error, and yes, planning. In your market, it will help you become the Pinball Wizard.