Fine Tuning Your Marketing Budget: A Wise Strategy for Difficult Times

Most companies that have been in business for more than 10 years have settled into a "formula" for establishing their marketing budget. Usually, it is a fixed percentage of revenue. And in good times, this works pretty well.

But times are changing and most companies are experiencing a downturn in their revenue base or they are seeing that they are not achieving their growth rates that were established a year ago. So what is a company to do to "protect the bottom line"? Their first efforts are to cut expenses and yes, many times, marketing is the first to go. (You know how wasteful those marketing people are -- always trying to "build brand" and "build awareness" instead of just generating those orders!)

But I am here to tell you that cutting your marketing budget might be the worst thing you can do and that your revenue might fall even further if you are not investing in your marketing strategies on a consistent basis.

I've had this argument many times as I used to prepare the budget for the next year. I remember my boss coming to me and saying "If we reduce the marketing budget by $100,000, that money will fall to the bottom line immediately." And I would respond, well, if you cut my marketing budget by $100,000, and I expect a 3 times return on my marketing investment, then revenues will fall by $300,000 -- so yes, that decision will fall to the bottom line but instead of adding $100,000, our bottom line will fall by $200,000. (After using this argument, I always got my marketing budget back!)

But, of course, in order to make this argument, you need to know your return on each and every marketing investment you make. And, as educational and reference publishers, we know this is an almost impossible task. But, instead of giving up on this issue, each and every publishing company should try to develop it's own measurement tools and/or formulas so that if you change the marketing mix or increase/decrease the marketing investment, you can project the possible effect on your business.

Fine tuning your marketing budget means looking at each and every channel of distribution and putting a value on the investment. Ask yourself the hard questions of: How much am I spending in each marketing channel and what is my return? What would happen if I mailed 25% less this year? Conversely, what would happen if I mailed 25% more? Where are the opportunities to increase my exposure in a difficult market? What is my competition doing? What are the long term affects of not exhibiting at this conference? Can I accomplish what I need to without a booth?

Here are some of the strategies I have recommended to my clients in difficult times.

Concentrate on Your Customers

Your customers are truly your most important asset. These customers are the most likely institutions to purchase from you in a difficult market. They know you, have confidence in you and will probably not want to shift to a new supplier in an uncertain environment. This means mail to them more often, call them on the phone, and provide them with special offers. Focusing on this segment will help you generate as much revenue as possible from friends.

Re-Focus Your Advertising Messages

In tough economic environments, most educators and librarians will be thinking about "how to get more resources with less money". Many companies make the mistake of cutting prices instead of re-focusing their marketing messages on the "value" of their products. While special offers are always good to spur immediate sales, the best strategy is to keep your prices stable.

Refine your Prospects

Do not mail to every school in the country. Do not mail to every librarian or reading teacher. Do not mail to every district administrator. We know that 25% of the market will NEVER buy from you no matter what you sell, how you price, or what your creative offer is. Do profile your customers and mail to prospects that share many of the same characteristics of your customers. Refining your prospecting should lead to higher response rates for your catalogs and direct mail efforts. And, increased response means a better return on your marketing investment.

Marketing in a difficult market is always a challenge. But it is also an opportunity to learn, test new things, and develop new strategies for success. I think it's an exciting time to be a marketer in the school and library markets!

ABOUT THE AUTHOR
This article was written by Carol Ann Waugh, President of Xcellent Marketing, a marketing and new business development firm specializing in the educational and library market. Xcellent Marketing offers a variety of marketing services to help publishers increase their revenues and profits from identifying new markets, providing critiques of web sites and marketing communications such as direct mail, catalogs, advertisements, etc. as well as developing effective traditional as well as Internet-based marketing plans. Carol can be reached at (303) 388-5215 or at cwaugh@xcellentmarketing.com.