Copyright
2009
by
BBlackwood




 
 
 
 Copyright
holder
is
licensing
this
under
the
Creative
Commons,
Attribution
3.0


 
 
 
 http://creativecommons.org/licenses/by/3.0/us




 
 






 
 
 
 Please
feel
free
to
post
this
on
your
blog
or
email
it
or
tweet
about
it
to
whomever
you



 
 
 
 feel
might
benefit
from
reading
it.
Thanks!




 If
you
do
reprint
content
from
this
report
I’d
appreciate
an
attribution
link
to:



 
 
 
 $mart
Marketing
On
Any
Budget
–
www.smartmarketing4.me



 2

 





















THE Question 




?


I
just
typed
the
search
phrase
“setting
a
marketing
budget”
into
Yahoo
and
it
came
back
 



with
over
73
MILLION
hits.
Obviously,
it’s
a
topic
that
a
huge
number
of
people
have
 

questions
about.
Chances
are
if
you’re
reading
this,
you’re
one
of
those
people.
 




 


 I’ve
prepared
this
book
to
give
you
an
overview
of
the
most‐used
methods
of
calculating
a




 marketing
budget,
ones
that
have
proven
helpful
for
thousands
of
other
enterprises
in
all


 manner
of
categories.





 


 Running
a
business,
non‐profit,
organization
or
group
is
complicated
enough.
I’ve
tried
to




 simplify
and
clarify
these
methods
so
they
can
be
of
use
to
regular
marketers
–
and
don’t


 require
an
MBA
degree
or
a
background
in
finance.




 


 I
hope
they’ll
help
you
answer
THE
question
that
is
on
so
many
marketing
minds.




 


 And
remember,
whatever
type
of
marketing
budget
you
have
–
large
or
small
–
you
can




 make
it
go
farther
with
the
tips
I
share
free
at
$mart
Marketing
on
Any
Budget.


 




 BBlackwood


 





 3







 Budget a percentage of revenues


Probably
the
most
common
way
that
enterprises
set
marketing
budgets
is
by
using
a
certain

percentage
of
total
revenues
or
gross
sales
(or
donations,
if
you’re
a
non‐profit.)
Ah,
but

WHAT
percentage?



1 

Both
the
U.S.
Small
Business
Alliance
and
the
Service
Corps
of
Retired
Executives



(SCORE.org)
recommend
2%
­
10%.
They
also
note
that
certain
types
of
businesses
spend




 more;
retail
and
business‐to‐consumer
companies
may
need
to
spend
up
to
20%,
at
least
in



the
getting‐started
years.





 


 Great,
but
how
do
you
decide
if
you
should
spent
2%
or
five
times
that?


 


 •
Are
you
just
starting?
Simple
physics
states
that
it
takes
more
energy
to
get
an
object




 moving
than
to
keep
it
moving.
The
same
thing
is
true
of
a
business
or
organization.
You


 should
look
to
the
high
side
of
the
range
when
you’re
trying
to
get
yourself
established.







•
Certain
types
of
businesses,
such
as
retail
and
business‐to‐consumer,
may
need
to
spend




 more
–
up
to
20%
to
break
into
a
competitive
market.
(Pharmaceutical
companies
may


 spend
up
to
50%
to
establish
a
new
drug.)




 


 Pluses to this system:
It’s
simple
to
compute.


 


 Minuses:
If
you’re
just
starting,
how
do
you
know
what
your
gross
sales
will
be?
Even
if
you



know
what
you
made
last
year
in
an
established
business,
will
THIS
year
be
the
same?




 
 4







 Budget a percent of profits


A
less‐aggressive
alternative
to
budgeting
by
gross
revenues
is
to
budget
by
NET
revenues



 or
profits.






2 Pluses to this system:
It’s
cheaper
–
your
boss
and
the
bean
counters
will
like
that.





 


 Minuses: It
will
give
you
fewer
marketing
resources.
And,
if
you’re
just
starting,
are
in
a




 very
competitive
industry
or
need
to
achieve
faster
growth,
it
may
not
be
enough.


 


































 For more smart tips: $mart Marketing On Any Budget: www.smartmarketing4.me


 5








Budget According to Industry Average


Schoenfeld
&
Associates
Consultants
of
Lincolnwood,
Illinois,
did
a
study
of
ad
dollars
spent

as
a
percent
of
sales
for
various
product
categories.

Here
are
their
findings:


3 


 Grocery
stores
 
 

1.3
percent


 
 Apparel
 
 
 

2.9
percent




 
 Soft
drinks
 
 
 

2.9
percent


 
 Lawn/garden

 
 

4.0
percent




 Education
 
 
 

5.0
percent




 
 Computers
 
 
 

5.1
percent


 
 TV,
radio,
electronics

 

5.3
percent




 
 Catalog,
mail
order
 
 

5.7
percent


 
 Retail
stores
 
 
 

5.8
percent




 Investment
advice
 
 

8.6
percent




 
 Cosmetics
 
 
 10.4
percent


 
 Confections
 
 
 10.6
percent




 
 Memberships

 
 11.0
percent


 
 Toys
 
 
 
 14.2
percent




 Cleaning
supplies
 
 14.5
percent




 


 Pluses to this system:
It’s
real‐world
data
taken
from
hundreds
of
actual
marketers.


 

Minuses:
These
are
averages
–
your
business,
your
competitive
market
and
if
you’re
new
or

established
will
impact
whether
you
need
to
budget
the
industry
average
or
more
or
less.


 6
















Model Your Competition




If
you
can
discover
or
figure
out
what
your
most
successful
competitors
are
spending,
you

can
budget
to
equal
or
better
their
outlay.




4 Pluses to this system:
It’s
pretty
realistic
in
terms
of
addressing
your
competitive
situation


 and
pretty
easy
to
sell
to
bosses
or
financial
officers.




 


 Minuses: Knowing
exactly
what
your
competition
is
spending
–
and
how
they’re
spending




 it
–
may
be
difficult
to
ascertain.


 




 One
way
is
to
ask
the
various
media
with
whom
your
competitor
advertises.
They
may
not


 tell
you
exactly
but
they’ll
be
happy
to
draw
up
a
plan
to
outspend
your
competitor
and
you




 can
make
some
assumptions
from
that.
If
your
competitor
does
a
lot
of
non‐advertising


 marketing
–
e‐mail
marketing,
personal
networking,
etc.
–
you’ll
have
to
use
some




 guesswork.


 




 







 7











 Go All In


If
you’re
just
starting
–
or
looking
to
grow
fast
–
you
can
estimate
the
expenses
you
need
to

keep
your
business
(and
family)
afloat
for
a
year
or
so
and
then
invest
everything
else
in


5 your
marketing.
That’s
generally
how
venture
capitalists
build
a
company
up
quickly.




 Pluses to this system:
It’s
aggressive.
In
poker
it’s
known
as
“betting
the
farm.”




 



Minuses:
It’s
aggressive.
And
you
may
over‐
or
under‐estimate
the
cost
of
keeping
your




 business
going
for
a
year.
If
you
over‐estimate,
fine,
plow
more
into
marketing.
If
you
under‐


estimate,
you
may
need
to
borrow
funds
to
keep
going.
And
remember
that
venture




 capitalists
usually
play
the
odds
–
they
EXPECT
at
least
one‐third
of
the
companies
they



invest
in
to
go
broke.
You
probably
don’t
have
their
deep
pockets.




 








 




 


 




 

For more smart tips: $mart Marketing On Any Budget: www.smartmarketing4.me




 8










Customer Acquisition Model




If
you
have
a
target
number
of
new
customers
as
a
goal,
you
can
calculate
how
much
you

can
afford
to
spend
to
acquire
them.
You
take
the
amount
of
profit
you’d
expect
to
average

6 from
each
new
customer
in
a
year,
multiply
that
by
the
number
of
customers
desired
and

then
allot
a
percentage
of
that
to
marketing
to
them.




 



You
can
even
budget
MORE
than
each
customer
is
worth
in
a
year
–
IF
you’re
sure
you
can




 keep
the
customer
for
subsequent
years
and
make
money
in
the
long
run.








 Pluses to this system:
It’s
an
exact
way
to
budget
how
much
you
can
actually
spend
to




 reach
your
goals.


 




 Minuses: If
you’re
not
an
established
enterprise,
you
may
not
know
your
cost
of
acquisition


 for
customers.
You’ll
also
need
to
figure
in
the
cost
of
keeping
the
customers
or
clients
you




 already
have.
Classic
marketing
wisdom
says
that
it
costs
seven
times
as
much
to
get
a
new


 customer
as
to
keep
one
you
already
have.




 







 9










CYA (Cover Your Assets)

 

No
marketing
budget
is
perfect
nor
is
setting
one
ever
an
exact
science.
There
will
always
be

a
measure
of
guesstimization
(an
excellent
and
realistic
marketing
term
I
just
made
up.)


7 Perhaps
the
best
budget‐setting
method
for
you
will
be
to
try
several
of
these
methods
–
on

paper
–
then
use
your
good
judgment
to
arrive
at
a
figure
that
your
enterprise
can
live
with.




 Remember
to
build
in
some
flexibility
and
a
contingency
fund.
I
always
include
a
10‐15%




 contingency
in
marketing
plans
because
you
can
never
predict
what
challenges
and/or



opportunities
your
business
or
organization
will
face
in
the
coming
year.
(One
reason
I




 think
five‐year
company
plans
are
usually
a
waste
of
paper.)








 Invariably,
my
clients
strike
through
that
contingency
line
on
my
budgets.
And
almost
as



invariably,
they
end
up
spending
that
contingency
amount
anyway
because
of
unforeseen




 circumstances.








 I
urge
you
to
CYA.
Foresee
that
there
WILL
be
funds
needed
for
the
unforeseen
and
put
that



in
the
budget.
I
hate
to
be
sneaky,
but
in
order
to
get
around
the
budget
cops
in
your




 organization,
you
may
need
to
hide
some
surplus
funds
in
other
projects.














 10





 About the Author




For
over
30
years,
Boyd
Blackwood
has
been
active
in
the
fields
of
advertising,
marketing,

public
relations
and
sales.



He
founded
his
first
advertising
agency
at
the
age
of
25
and
was
senior
vice
president
and

creative
director
of
a
large
marketing
firm
in
the
southwest
for
14
years.





 




 Among
his
favorite
accomplishments
are
creating
corporate
names
for
national
companies


 such
as
StaffMark
and
naming
the
national
program
AmeriCorps.
He
also
created
the
official




 souvenir
books
for
two
U.S.
presidential
inaugurations.
Creative
work
by
him
and
his
teams


 has
won
National
ADDY
Awards
and
been
featured
in
the
Clios,
Adweek
and
AdAge




 Magazine.


 




 Today,
he
helps
clients
through
his
virtual
agency,
Blackwood
&
Company,
and
assists
and


 inspires
other
marketers
through
his
blog
$mart
Marketing
on
Any
Budget
–




 www.smartmarketing4.me.






 









 11