By Guest Blogger Jill Snyder
I did something recently with my 2011 marketing budget that I thought was fun. I guess it’s fun if you are a revenue marketer so I better qualify that statement. I prepared my detailed marketing budget in Excel, and while working on my budget for next year I decided to add three new columns to the right side of my spreadsheet:
- Cost of doing business–The first column I labeled "cost of doing business." For each line item in my budget I asked the question "will this expense generate revenue or is it a cost of doing business." It's best if we face the fact that not everything we do in marketing generates revenue (ouch…that hurts). Items like brochures, folders, holiday cards, etc, don't generate revenue on their own, so those costs go in the “cost of doing business” column.
- Revenue generating–If the line item in your budget is a ‘revenue generating’ marketing tactic, the total amount for the year for this item should go in this column. Events, e-marketing, webinars, etc., go into this column. There may be some facets of marketing that may have dollars in both of your new columns. Take for example public relations. Although most of my PR investment does go into the ‘revenue generating’ column (and yours should too…if not you need to talk to Clarus Communications), I do realize that some public relations activities are executed as ‘air cover’ about the company in general, and I put those expenses in the ‘cost of doing business’ column.
- Expected revenue–The purpose of this column is to identify the amount of revenue that should be generated from this line item activity. For every dollar invested in revenue generating marketing tactics, you should get a return of x% of the investment. You may want $10 of revenue for every $1 of marketing expense, or higher or lower based on the business and market you are in. This number may not always be available to you, but talk to your finance department if you don’t know it and come up with a number you can at least begin to work with. For our example, let’s stick with a 10-times return on each dollar invested. So, this column is a simple formula of taking what’s in the ‘revenue generating’ column and dividing it by .10. You will quickly see the amount of revenue this marketing tactic needs to generate.
With these three new columns, you now have the ability to:
- Quickly see how much revenue your marketing budget as a whole should produce.
- See the return needed from each of your marketing tactics.
- Throughout the year, you have a quick way to determine if you should invest in a marketing campaign…or maybe swap out one campaign for another based on how the investment might pan out.
Jill Snyder is an outsourced CMO and a respected expert on revenue marketing.