How should I best allocate my marketing budget to maximize return on investment? This is one of the most common types of questions from our business-to-business marketing clients. In general, B2B companies want to know how to maximize impact while staying on budget.
The best way for answering questions of this kind is to first define “reach” from the organization’s perspective. The Business Dictionary defines reach as the “Estimated number of the potential customers it is possible to reach through an advertising medium or a promotional campaign.” However, companies often use the term interchangeably with “frequency,” which is the amount of times a potential customer will see or hear a brand message.
The term “frequency” found its footing in the business-to-consumer side of marketing and advertising in the 50’s and 60’s when companies needed to justify their media campaigns based on the number of households touched during a marketing campaign. Since then a segment of B2B companies have adopted this mindset as a means to measure their marketing operations.
These differing sentiments are the result of an all-too-common, misalignment between sales and marketing teams. One team may focus entirely on reach, while the other team focuses highly on frequency. For example, one team may focus campaign success based on likes, follows, website traffic, etc., while the other team is entirely focused on trying to get the word out to as many potential customers without enough frequency. Only a tight collaboration between marketing and sales will drive remarkable results.
In order to help both teams achieve results more effectively, I often ask clients to revisit their purpose because strategic business goals define the marketing budget strategy. I ask them “What goal is more important, reach or conversion?” A client needs to first determine its performance goals with conditions and criteria that both sales and marketing can work cohesively toward furthering. By setting target objectives, a company can then work backwards to set budget goals for maximum impact.
To ensure all aspects of operations, strategy and budget processes properly align for maximum performance, I recommend the following steps:
ALIGN YOUR SALES AND MARKETING GOALS
Ask yourself, “Are you trying to close immediate sales or are you trying to drive brand awareness?”
Also understand this marketing concept: less is sometimes more! You may want to generate copious leads, but having a distinct number of qualified leads that close at a higher percentage is more valuable. Alternatively, you may want the masses to know about your brand, but having a particular group connected to your brand at a deeper level will prove more profitable.
FIGURE OUT YOUR STRATEGY
There are many steps to a great strategy, but at a minimum, you should do the following:
- Put together a chart of your top five competitors and the top five messages they are taking to the market. Audit your competitors’ content on the web, radio, TV, trade publications, press releases, marketing materials, etc. Narrow each message down to no more then three words.
- Knowing your competitors’ core brand promises, where they are marketing, and who they are marketing to will help you determine a unique brand position and strategy to rise above their noise. If all your competitors are promising the same thing and using the same tactics, differentiate your brand by employing different tactics and messaging. The brand that trumpets the most compelling value in a remarkable way will have the biggest impact on markets.
- Develop a message and channel matrix for targeting your ideal customers by first creating buyer personas that represent your target clients. Record your customers’ interests, communications channel preferences and decision journey. Tailor your brand message to your target audience’s interests and decision journey then communicate that message across his/her preferred platform. This will help narrow the channel options to be considered and tether your marketing budget.
ESTIMATE YOUR MARKETING CAMPAIGN COSTS BY CHANNEL
Now that you have a persona built for each potential buyer and you know their preferred channels to research and purchase, you can begin to figure out the costs per marketing channel (ignore the cost of content production for now). Estimate the cost of the campaign with the end goal in mind.
Determine the pricing model (i.e. cost per click, cost per action, cost per lead etc) for each channel and select the one that works best with your company’s definition of reach. Knowing the pricing model will help you compare your projected cost-per-lead and ultimately help you calculate your expected marketing ROI. Be mindful of analyzing which combination of personas and channels delivers the biggest projected ROI.
CHART OUT THE DECISION JOURNEY FOR EACH TARGET PERSONA
You should be able to breakdown the buyer’s journey into key phases and assign different messaging to each stage to help simplify the path to purchase.
First, determine how long the purchase decision process is for your target buyer. If one of your target personas is an engineer who uses composite materials to develop parts for airplanes then you might have six phases within his/her buying decision process.
The first stage might be research, the second might be contact with potential suppliers, third might be design consultation, fourth might be prototype development, fifth might be testing, and sixth might be selection/sale. Those six steps might constitute a two-year selling cycle with numerous needed marketing materials. Identifying the critical buying path your target audience takes will help you determine how much of your budget will need to be dedicated to producing content related assets.
DO A CURRENT CONTENT ASSET ANALYSIS
Try to reuse, tweak, repurpose and re-design existing marketing assets to help reduce content costs. Begin by looking through and mapping all your whitepapers, case studies, marketing materials, videos, speeches, presentations, commercials, ad campaigns etc. to different stages of your buyer’s decision journey. Understand that the same content can be utilized across different stages for different personas.
DO A CONTENT GAP ANALYSIS
Analyze each phase of your buyer’s journey and understand the gaps in content. Look at each phase and figure out where your content lags and where you need to create additional content. Estimate the costs of content creation to create a full cycle of marketing materials tailored to specific channels for each buyer persona.
Keep in mind, each end customer might not follow the same buyer decision process, therefore each requires different marketing materials. For instance, a general manager of an auto parts manufacturing plant in Germany might use a different path to purchase than a general manager in Japan. Understand the costs to create content for each different persona for each preferred communication channel.
DO THE MATH
Remember we talked about what your real goals are in phase one. Now we apply those goals to figure out your potential budget.
If your goal is selling business insurance to business owners, which includes CEOs, CFOs and Risk Managers at various sized companies then your channels for reaching all three personas may include direct sales, independent agent/brokers and/or insurance wholesalers. You might end up with a chart or matrix with nine possibilities. Based on the example above you might end up with an initial budget outline for the first scenario that looks like this:
- Persona: CEO
- Selling Channel: Direct Sales Force Channel
- Content Costs: $50,000.
- Campaign Costs: $75,000 (six months)
- Impressions: 17,000.
- Cost per impression: $7.36
- Leads Generated: 140
- Cost per lead: $892.86
- Closed Business: 21
- Cost per closed business: $5,952.38
- Average new business value: $117,000
- Total Revenue Projected: $2,457,000
- ROI: 19-1
You would then do this same analysis for each of the other eight combinations. Now allocate your budget according to goal.
For instance, if you have $300,000 to spend, you now can choose between maximizing reach (impressions), leads, closed business (new clients), and revenue based on the combinations above, thus maximizing your definition of reach.
You can do the same type of analysis for social reach and any other marketing goal you may have in mind.
MEASURE AND ADJUST
You could have 30 possible persona/channel combinations and start by going after six of those combinations. As you do your marketing, put more money into the ones that are working and then try the seventh combination, then the eighth, etc. It could take a few years to really get to a place where you know without a shadow of a doubt that you are maximizing your reach while cost-effectively budgeting your marketing spend. That’s when real growth occurs.
At Elevation Marketing, we focus on all aspects of operations and strategy to ensure alignment between sales and marketing. We build strong brands by building internally and then reaching outward. We help rally your company stakeholders around a shared brand strategy (and consequently corporate strategy), so that every individual clearly understands the vision and executing against it becomes second nature.
Start the road to cost-effective strategy execution by downloading the below guide to building your marketing budget.