Is your marketing budget enough to achieve your goals?
Many times when I talk to companies about their marketing, they’ll ask: “How much should we budget for marketing?”
It’s an important consideration, as most small aviation businesses don’t have large budgets to spread around.
My answer: “Spend the least amount needed to achieve your business goals.”
How much is that?
The best method I’ve found for determining your particular marketing budget is actually quite simple:
- First, identify your annual goal for revenue.
- Next, divide it by the average sales revenue each customer generates in a year (in other words, a customer’s annual value).
- Then, multiply that number by your CPS – Cost Per Sale – what you currently spend on advertising, internet marketing, public relations, promotional materials, etc., to close each lead.
That’s what you’ll need to budget to reach your target. The equation looks like this:
Marketing budget = (revenue goal ÷ average customer sales) x cost per sale
The key to making this equation work is to have accurate numbers for the average customer revenue and your CPS. So if you haven’t done so already, begin to track the effectiveness of your sales and marketing efforts religiously. Once you start tracking sales, you should be able to calculate how much money it takes to obtain each new customer.
Use this Budget/Tracking Chart to calculate how much money it costs to generate each lead and close each sale:
|A.||Current annual marketing expenses|
|B.||Average number of leads generated per month|
|C.||Average number of sales closed per month|
|D.||Conversion ratio ( [C ÷ B] x 100 )|
|E.||Cost per lead ( A ÷ [B x 12] )|
|F.||Cost per sale ( A ÷ [C x 12] )|
Understanding these numbers will get you off to a good start. However, there’s another important factor to consider: how to spend the dollars you’ve allotted for your budget.
Why Most Marketing Campaigns Fail
The most common reason why marketing campaigns fail is that they’re asked to do too big a job on too small a budget. Do you realistically have enough marketing dollars to ensure a good shot at achieving your objectives?
A great marketing plan may include a lot of tools and tactics, but to implement them effectively takes proper funding. Choose which ones you’ll use carefully. Just as it’s a mistake to spend too much on a single marketing tactic, it’s equally wasteful to attempt too many things superficially. It’s much smarter to select a few marketing tools that are cost-effective and demonstrate good results and concentrate your marketing dollars on these.
If you hit a ceiling in the amount you can afford to spend, it’s best to reassess your short-term and long-term goals, rather than expect an underfunded program to perform beyond reasonable expectations.
As an avid pilot, there’s an analogy I like to use: If you don’t fund your marketing budget sufficiently, it’s like trying to fly over the Atlantic Ocean with half a tank of fuel. You’re going to make some progress, but you won’t make it to your ultimate destination.
You may discover that carefully planned campaign with an adequate budget won’t get you across the Atlantic, but could instead get you to beautiful Bermuda. And that’s not half bad, is it?
If you could use help creating a smart marketing budget, contact us.
Photo by 401(K) 2013