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Capturing Expenditures With a Marketing Budget

February 20, 2015

Instead of seeing marketing as a sales-driven function, a number of companies view it as a time-consuming and cumbersome process, one that involves nothing more than launching a couple of email campaigns and placing a nondescript advertisement in a magazine. Unfortunately, these companies are unable to see the real focus of marketing and its direct correlation to sales.

Marketing initiates the sale. Better yet, it creates the condition for sales to occur. It drives opportunities. Without it, a company has no focus, no approach or strategy to conquer their market and no way to continuously reach their audience. However, it's not enough just to understand marketing's role in business development: You have to have a budget that captures expenditures and tracks performance of each individual campaign and strategy. In the end, it's the only way to reduce your company's costs of acquiring new customers.

The end goal is to increase your return on investment (ROI). In marketing, increasing your ROI means increasing the number of qualified leads you generate relative to your expenditures in marketing your product or service. If you can successfully maintain, or even reduce, these expenditures, while increasing the number of qualified leads you find, then you'll increase your marketing ROI while reducing your costs of closing new business.

It all sounds relatively easy doesn't it? Well, while it isn't an exact science, it can be a much easier process when you've taken the time to track your expenditures. To help you put together that budget, we'll review the example marketing budget below.

Marketing Strategies    Quarter 1    Quarter 2    Quarter 3    Quarter 4    Expenditures
LinkedIn (advertisements and lead generation)    $500.00    $500.00    $500.00    $500.00    $2,000.00
Articles and Whitepapers    $450.00    $0.00    $450.00    $0.00    $900.00
PPC Campaigns (online)    $300.00    $300.00    $300.00    $300.00    $1,200.00
Affiliate Marketing (blogs, internet magazines)    $250.00    $250.00    $250.00    $250.00    $1,000.00
SMS Marketing (text? message)    $175.00    $175.00    $175.00    $175.00    $700.00
Trade shows (conferences, table top shows)    $0.00    $12,500.00    $0.00    $17,000.00    $29,500.00
Direct mail campaigns    $75.00    $75.00    $75.00    $75.00    $300.00
Updated catalogs and brochures    $0.00    $2,500.00    $0.00    $2,500.00    $5,000.00
Email campaigns    $75.00    $75.00    $75.00    $75.00    $300.00
                    
Summary    Quarter 1    Quarter 2    Quarter 3    Quarter 4    Full Year
Total Expenditures for Marketing Strategies by Quarter and Full Year    $1,825.00    $16,375.00    $1,825.00    $20,875.00    $40,900.00
Revenue (Quarter and Full Year)    $215,000.00    $225,000.00    $250,000.00    $260,000.00    $950,000.00
Expenditures as Percentage of Revenue    1%    7%    1%    8%    4%


This marketing budget is for a company operating in a business-to-business industry. They have foregone the customary Facebook page and have instead chosen to work with more business-related social sites. In this case, they are using LinkedIn to place advertisements and use those advertisements to generate leads. Next, articles and whitepapers are used on LinkedIn and the company's website and blog. Online PPC (Pay-Per-Click) campaigns are used to drive visitors to the company's website. This is combined with affiliate marketing strategies that cater to industry-specific blogs, online magazines and business-focused forums.

SMS (short message service) marketing is used with existing customers in order to keep them up-to-date on the most recent offers. Trade shows, conferences and table top shows are the company's main lead generator as they give the company a chance to work with customers face-to-face. Direct mail campaigns are combined with SMS campaigns in order to keep the company in front of customers. In addition, the company typically updates its catalogs and brochures twice yearly. Finally, email marketing campaigns are used to advise customers of overstock situations, company news, emerging industry trends and statements of accounts.

Expressing Expenditures as a Percentage of Revenue

The marketing budget expresses the amount spent on marketing in relation to the company's revenues. This percentage is calculated by taking the total spent in a given quarter divided by the revenue for that quarter. For instance, the first quarter's total expenditures equated to $1,825.00. This is then divided by $215,000.00 in order to give 1%. For the entire year, the company spent 4% of its revenues on marketing.

From this information, the company can start to determine the effectiveness of individual marketing strategies by determining their costs of leads. Tracking where leads come from, and the cost of lead generation, allows the company to determine which plans are working and which ones are falling short of expectations.

Determining Your Best Marketing Strategies
 
It's not just about how many leads marketing secures. Instead, the focus must be to understand how many of those leads actually become customers. Far too often a company assumes that any lead secured is a solid lead to work with. It simply isn't true. Make sure you define the costs of getting customers by determining the number of actual customers resulting from specific marketing strategies. Next, take the time to understand why one strategy works better than others. It will point the way to increasing your marketing ROI by allowing you to spend more of your time on the strategies that produce the best results.

A marketing budget is a critical tool every company needs. It provides insight into the costs associated with marketing a given product or service in a given market. It allows users to track performance of sales relative to marketing expenditures. Regardless of whether you operate in a business-to-business (B2B), business-to-government (B2G) or business-to-consumer (B2C) industry, you must take the time to track the results of your marketing strategies with a marketing budget.

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