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Featured Links: Advertising

	The Budget Dilemma: How Much and Where to Invest?

	Each year, most marketing pros sit down to help identify corporate goals and then develop budgets and strategies to meet them. TMCA explores the best ways to get it all done. What is the most practical approach to establish your budget and assign dollars to strategies? At its basic core, you must clearly understand your business goals, build a marketing plan that drives results to support said goals, and then establish a budget to make that plan happen. It sounds oh so simple, yet it’s laden with barriers and challenges, ranging from top management’s misperceptions of the value of marketing to the lack of adequate marketing dollars available. Start With The Stategy “It isn’t that complicated,” according to Dick Metzler, Chief Commercial Officer for Greatwide Logistics Services, a provider of truckload transportation and warehouse/distribution services. “Ideally, the marketing executive should have a seat at the management board table in order to participate in the development of the corporate strategy.” In Metzler’s case, he leads all strategy development so that the company stays grounded in the voice of the customer. “Either way,” he says, “understanding the company strategy is key. The marcom tactics then become easy to choose, budget and make commitments against.” Mark Miller, Director of Corporate Communications for Crowley Maritime Corp., agrees: “Make sure you understand the rules of the game first. Do you plan to a budget number, or do you plan based upon need and what you are trying to accomplish without regard for the amount of money it will take to get the job done?” Miller recommends to stay close to sales and marketing people so you can offer the best advice. “One of the hardest things to do in a B2B environment is show results from your advertising,” he says. “But if you can, it will go a long way to helping you build credibility, larger budgets, more responsibility and perhaps even a seat at the executive leadership table.” Then Set Your Budgets If you’re responsible for establishing a marketing budget, there are a variety of methods to use—depending upon what works best for your organization. The recently released TMCA Marketing Trends Report, which is based upon practices of hundreds of marketing professionals in the transportation industry, shows that nearly half rely on historical budget numbers. Another budgeting approach, “$0-based budgeting,” is where marketers start from scratch and build budgets each year. This accounts for another 26.5 percent. More than 15 percent rely on dictates from upper management (see bar graph below). “For those basing budgets upon percentage of gross revenues, marketing activities get a bigger share of the corporate budget than might be expected,” says Brian Everett, CEO of TMCA. “In fact, the TMCA Marketing Trends Report found that nearly 40 percent of companies setting budgets based upon gross revenues set marketing budgets from 1 to 1.99 percent of annual gross company revenue. That’s comparable to many other industries.” For Metzler at Greatwide, budget-setting is a combination of factors – primarily historical, to some degree a percent of revenue, followed by program overlays for new initiatives. “From an approval point of view,” he says, “the most important aspect is to track credibility and measurable results that support the company’s objectives.” However, Metzler thinks that setting budget figures should be viewed like a CAPEX investment or M&A deal. “First, the budget should be linked to the strategic plan and current business plan for the company. For example, if the company wants to increase its revenue growth and/or market share by ‘X,’ there ought to be a logical linkage to an increase in budget with a corresponding commitment that achieves a minimal threshold return on the incremental investment.” Miller’s philosophy at Crowley differs slightly: “The best way to budget is using the $0-based approach. You start from scratch every year, determine what you’re trying to accomplish, put the plan together that you think will get you where you want to be, and then fund it. Some years, you may have special initiatives that require more resources and in other years you could spend less.” The Art of Allocating Dollars to Tactics So how do you go about determining individual budgets for individual tactics? According to the TMCA Marketing Trends Report, the top three uses for budget dollars are print advertising, printed collateral and special events. However, the reports shows that in the past five years overall spending on print advertising has increased the most, with e-marketing a close second. Smaller companies tend to place more emphasis on different tactics than larger companies do. Companies with less than $50,000 in annual gross revenue spend nearly half of their budget on e-marketing, direct mail, lead generation and media relations (listed in order of ranking) while companies with $50,000 or more in revenue spend less than a third of their budget on direct mail, media relations, e-marketing and broadcast advertising. Perhaps this reflects the tendency of smaller companies to do more with less. To be successful, marketers need to continually push themselves to focus on the business goals and be willing to flex tactics with what needs to be done. At Crowley, Miller is following this approach. “We’re shifting some of the money we would normally spend on print advertising into Internet advertising and into direct mail,” he says. “The money is just not there any more to wage an effective print advertising campaign. Plus, I want to reorient our approach with marketing communications to generate identifiable sales leads for our sales force.” To find more information on budgeting trends, as well as trends ranging from average compensation and benefits to staff sizes and outsourcing, order the TMCA Marketing Trends Report. Cost: Only U.S. $79 for TMCA Members. For more information, visit http://www.TMCAtoday.org.
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