Published June 2005

Getting a bigger bang
from a smaller budget

The cost of doing business continues to climb. The escalating price of energy and health insurance (not to mention taxes) top the list of contributing factors. Even with an improving economy, margins are still shrinking. Consequently, marketing departments and professionals are being asked to deliver greater results from smaller budgets.

Peter Drucker said, “Business has only two basic functions: marketing and innovation. Marketing and innovation produce results. All the rest are costs.” Following are a few “myth and method” contrasts that demonstrate how to leverage a pilfered marketing budget.

Myth No. 1: Look for the cheapest advertising rates. Just because it’s cheap doesn’t mean it won’t be expensive. If it doesn’t work, any price is too expensive. It’s better to compare media and advertising opportunities by CPM (cost per thousand).

Method — divide the cost of an ad (or campaign) into the audience reached (within your target demographic), and multiply that sum by 1,000. As long as you are comparing apples to apples, e.g. the same half-page ad between two competing newspapers, a CPM comparison will unveil the real deal. And don’t forget to ask for value-added that isn’t on the rate card.

Myth No. 2: Stretch the budget as far as possible. The conventional wisdom here is that you’d reach more potential customers. You may reach more eyes and ears, but, with little or no impact.

It may sound counterintuitive, but the best method is to reach fewer people with greater frequency of exposure to your brand/offer. Spreading your budget too thin doesn’t create a memorable impact. Frequency sells!

Myth No. 3: PR is free, so put together a release and distribute it to as many media outlets as possible. Here again, less is more — and effective PR is “earned media;” doing it right isn’t free. News organizations are inundated with releases, most of which are not a good fit for their audience, or aren’t newsworthy.

The best method is to be selective when it comes to releases and distribution. Concentrate on the outlets that have a good audience match with your target market. Also, the story must have legitimate news appeal.

Myth No. 4: Focus the budget on business development tactics. Depending on your business category, it can cost 10 times more to acquire a new customer than it does to retain an existing one.

Rather than blindly focusing on gaining vs. retaining, a more insightful method is to evaluate your average cost-per-acquisition against the LMV (lifetime market value) of your customer. It may be more cost effective to increase the LMV. Without doing the math, you won’t know how to best allocate your budget.

Finally, there are two mandates to getting a bigger bang out of a smaller budget. First, following up leads: The cost of acquisition can skyrocket without a solid triage system that focuses resources on top-level leads. Second, measuring results: It’s tough to reallocate the budget toward tactics that drive the greatest return on investment without knowing what, within your marketing portfolio, are the contributors and detractors of profitability.

Andrew Ballard, president of Marketing Solutions Inc. in Edmonds, develops brand leadership strategies for businesses and teaches strategic marketing through Edmonds Community College. He can be reached at 425-672-7218 or online at www.mktg-solutions.com.

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