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Are you over budget on marketing promotions (e.g. advertising, public relations, direct selling and sales promotions) again this month? Maybe it’s time to revisit your budgeting methods to see if there is opportunity for improvement. To get the ball rolling, here are the six most common budgeting methods that I have observed in our region:
Percentage Method
This approach is the most common used in businesses. This method involves setting a budget by percentage of sales, sales goals or gross markup. The percentage used can be derived from your company’s past performance and/or industry standards. This approach is usually the best option for most organizations because the goal is tied directly to increasing revenue. This method bodes well for creating a comprehensive annual plan.
Goal-and-Task Method
This approach is developed by defining specific goals, determining the tasks needed to achieve these goals and then estimating the costs of performing these tasks. This method is common with long-term objectives like increasing market-share or increasing a brand name's top-of-mind awareness.
What’s-in-my-Wallet Method
This method involves planning marketing promotions month-to-month by “what’s available” rather than by “what’s the sales goal.” This approach may hold back revenue opportunities because of the lack of planning. However, this method is common because some companies look at marketing as an expense rather than as an investment.
Based-on-my-Competitor Method
This method is based on a strategy to invest less, the same or more than a competitor. A company using this method may be at a disadvantage because they are at the mercy of their competition’s spending patterns rather than their own goals.
Co-op Only Method
This planning method involves limiting a budget to just the manufacturer’s cooperative (co-op) advertising support dollars. This may cause a disadvantage because the business using the co-op is limited by the manufacturer’s creative message strategy and available co-op funds.
Zero Method
This method involves keeping the marketing investment as close to zero as possible. Sometimes, this method is regrettable, especially when the going out of business advertising works well to move inventory.
Our Advice, whatever budgeting method for marketing promotions you choose for your organization, make sure to budget “time” to develop a comprehensive
MacDalton Burns is a marketing advisor and partner of Absolute Marketing Group. He can be reached at mac@absolutemg.com for more information.
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