Strategy Archives - Page 33 of 53 - McLellan Marketing Group

How much should I spend on marketing?

October 11, 2007

This is probably one of the most asked questions of marketing agencies and consultants. If you google the phrase, there are almost 17 million results. Guess it’s on peoples’ minds, eh?

I think one of the reasons why it’s on everyone’s mind is because there is no magic answer. Before we get into the methods of determining a right answer, let’s be very clear about these two points:

The exact amount matters less than having an amount. In other words, having and tracking a marketing budget, even if your initial number is off, is much more important than getting the number exactly right.

You can have the right budget and spend it on the wrong things. A marketing plan should always be tied to a strategic marketing budget.

Now, let’s tackle the question. Here are some of the more effective ways to set a marketing budget:

Percentage of gross sales/revenue:

This is probably the simplest method. Most experts recommend somewhere in the range of 2-8% of gross sales. McKinsey & Company is often quoted at 5%.

Most small businesses (less than $5 million gross revenue) should shoot for at least 7-8%.

Industry-specific:

Many industries have their own standard. For example:

Consumer package goods: Up to 50% of projected net sales to launch a new product
Industrial B-to-B: 1% of gross sales
Retail: 4-10% of net revenues
Banks/Credit Unions: 2-5% of assets
Law firms: 1-4% of gross revenues
Pharmaceuticals: Up to 20% of net sales
Hospitals: 1% of net revenues

Lifetime value of customer:

The idea is simple. You identify how much profit (on average) you make during the lifetime of that customer relationship and determine how much you are willing to invest per customer acquisition. If you choose this method be very careful that your numbers are accurate.

Goals/Plan driven:

The thinking behind this method is really a blend of some of the others. Identify measurable goals (# of new clients, % of revenue increase, etc) and then determine your sales equation.

For example: For every 100 prospects approached, you get 25 initial meetings. From those 25 meetings, you can expect to get 12 invitations to present a proposal. From 12 proposals, you will score 4 new clients. If your goal is 20 new clients, you now know that you need to approach 500 qualified prospects. You build your marketing plan to accomplish that and assign the costs accordingly.

Again, this method requires very accurate numbers to make the equations viable.

So what do you think? Which method do you currently use? If you don’t have a marketing budget, which method do you think would serve you best?

Do I need a marketing budget?

October 9, 2007

"How much should we be spending on marketing?" This is probably one of the most common questions we get asked. Or, on the flip side of that, we hear, "oh, we don’t have a budget. We’re just a small business. We just go with our gut."

No, no, no, no, no.

Let’s get to the most important message first. Every company, even a one person consultancy, should have a defined marketing budget. You absolutely, positively will mis-spend, over spend and wrongly spend if you do not have a budget. I promise you that.

Think of a budget as those bumpers you can use in a bowling alley. (even if you don’t have kids!) They keep you from getting too deep in the gutter. You can still get a little off center, but you can’t completely skip the lane. With the bumpers in place, you’re bound to hit at least a few pins.

You need a written marketing budget that is tied to your sales goals. Now that we know you need one, in the next post we’ll talk about how to create one.

For those of you who have ventured into the waters without a budget, any war stories we can learn from?

BrandingWire: Why are we losing business?

October 8, 2007

This month’s BrandingWire offering asks an interesting question. A B2B consultancy that works primarily with high-tech and health care clients is losing market share. What should they do?

Here’s their current situation:

They are losing contracts to lower pricing and bigger firms.
They’ve stopped growing.
If they do land a client, they usually only buy one project and don’t return.

Here’s how they describe their client profile:

Revenues: $1 million to $25 million
Employees: 150 or fewer
Verticals: High-tech and health care
Location: North America

Sometimes the best advice we need to offer a prospect or client is — you shouldn’t market anything right now. To jump into marketing tactics at this stage with this particular client would be putting lipstick on a pig.

There are questions that need asking long before we pull the trigger on any attempt to help them attract new clients. They have problems that marketing cannot fix. And it would be irresponsible of us to encourage them to spend money that’s just going to perpetuate the problem.

This is a classic mistake many businesses make. They’re struggling so they throw more marketing dollars at the problem. But what if the problem has little to do with marketing? Here are some harsh realities that this client needs to face before they launch any new marketing initiatives.

Your target market is too big

The range between $1 million and $25 million is huge. Companies on each side of that size spectrum behave completely differently. My guess is that our client needs to drastically narrow that range to find their sweet spot. Right now, they are aiming at much too wide a target.

You don’t know how you are perceived

We need to have some in-depth conversations with past clients, current clients and those clients who opted for a competitor. We need to understand, from their perspective, how this company is coming across.

The biggie: You can’t sustain business

But, without a doubt the most glaring problem we need to solve is the company’s inability to keep current clients happy and coming back for more.

If you can’t earn a current client’s trust and more business, then you are destined to fail. No business can be profitable with a revolving door or clients. The costs of acquisition is just too high.

Bottom line:

This year’s marketing budget is going to be dedicated to identifying and fixing the problems that have gotten our client into this situation. We can’t market them out of the hole they’ve dug.

As is the BrandingWire tradition, there will be several other marketing pros who will weigh in on this scenario. Check out their posts as well!

Olivier Blanchard
Becky Carroll
Derrick Daye
Kevin Dugan
Lewis Green
Gavin Heaton
Martin Jelsema
Valeria Maltoni
Drew McLellan
Patrick Schaber
Steve Woodruff

Marketing isn’t about shortcuts

October 1, 2007

Remember that one essay test you took in school. You meant to study. But for some reason you just didn’t have the time. Truth be told, you didn’t really read the book. But you skimmed over the Cliff Notes. And you did repent in the end — cramming the night before the test.

Sure, sure…you should have started cramming a few days earlier or at the very least, not so late that night. With the radio on.

Do you remember what you got on that test? I’ll bet you weren’t happy with the grade.

Shortcuts didn’t work in school and they don’t work in marketing either. I have yet to see a marketing department or agency that had a drive-up window.

I get why it happens. There’s an almost constant demand on CMOs and marketing directors to produce results. And no agency worth their salt doesn’t want that too.

But there are some pretty important aspects of your business and products/services that need to be understood before we just whip up a brochure or direct mail series.

We aren’t doing the strategic thinking and planning just to get our jollies. We have a responsibility. We owe it to you. Because you’re about to spend a lot of money. We want to make sure you spend it right.

This applies if you’re doing your own marketing too.

Getting ready to produce something. Are you sure you’re not taking a shortcut?

If you can’t describe how you are genuinely and relevantly different from your competitors, stop.
If you can’t describe your ideal customer, stop.
If you don’t have a broad brand/marketing plan so that you aren’t operating in a vacuum, stop.
If you haven’t defined how you are visually going to communicate your company’s offerings, stop.
If you don’t know how you’re going to follow up on the leads the new marketing tactci generates, stop.

Whether you’re working with your internal team or with your agency — don’t short change the process. If you do some strategic thinking up front and make some of those key decisions, the tactics and tools actually get produced much faster and much more cost effectively.

Shortcuts are never going to yield the results you want. Better to do it right than do it again. Just ask your former teacher who gave you the C.

How do you ensure that you’re not taking a shortcut?

Where is your customer’s watering hole?

September 26, 2007

You're on a photo safari. You want to get a great shot of the elusive white tiger. Where do you go?

How about where the tigers hang out? Where is their watering hole? Odds are pretty good that if you hang out where the tigers hang out — you'll get that shot.

The same is true of your customers. Want to have access to them? Go where they go. Walk their walk. Talk their talk.

By hanging out at your customer's watering hole, they become a person you're having a conversation with, not a crowd you are shouting at.

Where do your customers gather? What are you doing to make sure you're there too?

Ready to do a brand check?

September 23, 2007

Consumers are bombarded with 3,000+ marketing messages a day. Are you sure you're breaking through the clutter with a consistent brand message?

Swing over to my post at Small Business Branding to see if you've missed anything.

Who will your customers mimic?

September 21, 2007

I flew to San Francisco yesterday on United. (Only one mechanical delay, so they are improving.)

One of my pet peeves is when the flight attendant is doing her safety spiel….no one listens. They keep talking, reading or whatever, but they are not listening.

Do I think most of us need to hear the speech again? No. I just think it's incredibly rude. (props to Mom and Dad for the manners lesson).

So…I always make a show of putting away whatever I am reading and pay rapt attention. I always hope I am setting an example and others around me will follow suit.

Well, the guy I was sitting next to on this flight did not. He calmly kept reading his magazine, completely ignoring the flight attendant.

Oh, did I mention he was a United employee in full uniform?

If your employees don't get it and don't care about setting a good example, your customers never will. What rule/expectation do you need to reinforce with your employees next week?

Logos 101

September 19, 2007

All too often, marketing messages get lost because they are packed like sardines with other marketing messages. There is no place that is less forgiving of that than a logo. A successful logo captures the essence of a company with one quick mark. According to Paul Rand, here's what a good logo must do.

It should be timeless. It should be flexible so as the company evolves, the meaning behind the logo can evolve too.
It should be a mark that can be interpreted by anyone, almost anywhere.
It should send a clear message.
It should work in all media, in all colors and black/white combinations.
Above all else, it should be simple, recognizable and relevant.

How does your company's logo stack up?

If you're wondering who Paul Rand is, he's the man who designed some of the most recognized logos in our culture: UPS, Westinghouse and IBM.

Want to tune up your sales savvy?

September 17, 2007

In terms of sales strategists, they don't come much smarter or more engaging than Jill Konrath. I've shared some of her ideas here before. She's got a great blog and has written the best selling book Selling to Big Companies.

One of the marketing/sales concepts that I preach all the time is give a little first. If you want someone to give you their valuable time or attention, let alone their money — you give first. A free sample to let them taste what they can have for themselves.

Jill, as you'd guess, is a master at this technique.

In launching her sales conference (November 5-6, Mpls) geared specifically for women, Sales SheBang, she has put together an incredible Goody Bag, filled with free e-books on the art and science of selling, all written by Jill herself.

I'm no fool so I downloaded each and every e-book. Each one is an excellent primer on a different aspect of selling. Check out this grid of insights from one of Jill's e-books.

There's content for staff meeting or two right there!

In a recent e-mail exchange Jill said something that I think is very indicative of who she is as a person. She said, "I am in my "mentoring" years and willingly share what I have to help others in any way that I can."

Take Jill up on that offer…grab those e-books and soak up the smarts.

Are you a pick up artist?

September 15, 2007

Having a teenager in the house means we watch some pretty interesting TV shows. A recent VH1 offering is called The Pick Up Artist. It features 8 lovable losers who have never had any luck with women and a Pick Up Artist named Mystery.

In the hour long show, Mystery teaches the guys some slick language and practiced "gambits" as he calls them. Then, the guys walk into a crowded bar and look for possible "targets." It doesn't matter who they are. Any woman will do.

The guys fumble through the gambits, trip over themselves in their eagerness to sell themselves to just about anyone….and in the end, usually leave the bar alone, tail tucked.

They're not there because they care about the women or even want to get to know them. They're just trying to score before the other guys do. It's about the win, not the person.

Pretty sleazy, isn't it?

I was feeling pretty high and mighty until I realized that what Mystery's teaching isn't all that different from how many companies approach marketing.

Use slick language
Have a practiced "gambit"
Identify a target
Run the gambit, hoping to score
It's not about the other person, it's about the score

It's an easy hole to fall into when you're trying to make this quarter's projected sales numbers or feeling the pressure of a CEO's scrutiny.

So before you dismiss Mystery and his pick up lines are you sure you're not a pick up artist too?

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