It’s now time to look closer at the strategic implementation of your tactical marketing plan and budget. Your plan and budget should reflect your enlightened awareness and understanding of the strategic importance of marketing in your organization.
We are often asked, “How much will it cost to implement a tactical marketing system?” In order to estimate the cost, we need to incorporate lead generation, marketing tools, drip or (hopper) system, and (knock down) or ideal customer prospect lists. In our process we use a Tactical Marketing Plan Overview/Cost Worksheet. The worksheet is simply a way to compile information about the specific media, quantity, cost, start date and duration of your tactical marketing plan.
Since every company’s tactical plan and budget will be different, let’s talk in general terms. Let’s start with the question every business owner asks, “How much should I allocate to execute my marketing plan?” I believe you should spend as much as you can possibly afford on marketing. Of course you only want to spend your precious cash on a marketing plan deeply rooted in the marketing equation. You only want to invest in a plan that you have tested in small-scale tests to ensure a return on your marketing investment when you roll it out on a larger scale.
Understand that marketing offers you the ultimate leverage in your business. It enables you to create what we call a “profit faucet.” If you can figure out how to generate well-qualified leads, why wouldn’t you want to generate as many leads as you can handle? This of course assumes these leads are profitable, meaning you have tested and proven to yourself you can close a certain portion them, why would you want to limit the number of leads – and the amount of money you can make – to some arbitrary number your finance person or bean counter calls “your budget?”
Marketing is the MOST IMPORTANT activity in your business. It offers you leverage. Its upside potential is unlimited. Every other function in your business is subservient to marketing – including accounting and finance. Your engineering, production, personnel, support and ever other department is subservient to marketing. You should maximize your investment in marketing because it will make the biggest difference in your company’s bottom line. Let your bean counters figure out what to do with all that money after you’ve made it. Don’t let them box you into some arbitrary budget constraint.
So how do you figure out how much to invest? Look at the worksheet and start with lead generators. Figure out which media will work best for you. Test your ideas and verify your hypothesis. Enter the lead generation methods you think will work best for your business. If you think radio, TV, or PPC are the best methods, enter each on a separate line. In the case of radio or TV, write in the specific stations each on a separate line. Then determine the quantity, cost and other information for each specific type.
Next list the marketing tools you believe you will need to further educate prospects as to why you are the best choice. Research and determine the design, development, production and distribution costs based on the quantity and duration. After you’ve written the report and you know the strategic message is on the money, you’ll have the content for the audios, videos, and DVDs, etc. Again, the point of this worksheet is to put all of your costs in front of you on one page so you can evaluate your options.
What this worksheet allows you to do is run “What if” scenarios. Of course you’ve got to know how much your average customer and sale is worth as well as the lifetime value of a customer. The primary reason so many businesses have taken their marketing online is because the costs of lead generation appears to be significantly lower than offline options. However, as we’ll see, upfront costs are relative. What’s truly important is the return on your marketing investment.
For example, if you decided to send our recommended 6×11 postcards every two weeks for a year to a database of 3,000 prospects, that will cost you $58,500 (26 times per year x 3,000 prospects = 78,000 postcards x 75 cents each). Let’s also say that you allocate about $5,500 for the strategic marketing messaging, design and layout of those postcards. That’s a total cost of about $64,000 for the year.
You might think $64,000 is a lot, or perhaps not enough. But you’ve got to know how much your average customer and sale is worth to you before you determine the real value. First, that number translates into $53,333 per month and that’s a reasonable marketing figure. Next, look up your ROI worksheet. You can use that worksheet to evaluate the profitability of your lead generators or your marketing tools. But now we’re going to use it to make an intelligent decision about your hopper system. Will the gross profit of your average sale justify this expense?
Let’s take a look at an example of how this works. We consulted with a compressed gas distributor that did annual sales of $17 million in a four-state region. We determined they had a defined target market, meaning we could identify and obtain a list of their prospects who were welding distributors, construction companies and welding contractors. We determined there were about 5,000 prospects with about 1,500 already in their database. That left 3,500 prospects.
We decided to send one postcard every two weeks and send an email the other two weeks. We would have to spend about $80,000 for postcards including the creation of the strategic marketing messages, design, layout, production, printing and postage. We also determined that our list only had email address for about 3,000 of the prospects. This would cost us some labor to call those prospects and get them to a tune of about $1,000. Creating the strategic marketing messages, design and layout of a series of powerful messages cost about $4,000. Total implementation for this hopper system was $85,000.
Brad, the owner, nearly fainted when he saw that number. Why? Because as a distributor, he had never spent any money on marketing before, let alone $ 85,000 in a year. Needless to say, he was stunned.
We asked Brad how many communications each of those 5,000 prospects (excluding existing customers) had from his company last year. We said the contact could be by any means; phone call, fax, email, letter, postcard, salespeople, advertising – anything at all. The answer was zero. We explained to Brad this was why he was not increasing his sales much over the past ten years. He wasn’t contacting anybody about anything! A large chunk of his prospects didn’t even know he was an option.
We then explained to him what the $85,000 would buy him: All 3,500 prospects will receive a well-articulated, powerfully stated, marketing equation-styled postcard from his company every two weeks that hits their hot buttons, identifies with their problems and put his company’s inside reality on shining display 26 times per year. Then, all 3,500 prospects and 1,500 existing customers will receive an email every two weeks that will do the same thing. Those 3,500 prospects are now receiving 52 contacts per year from his company. Each of the contacts will follow the marketing equation and will make offers for more educational information. Since his inside reality is rock-solid, and since his company adds face value to its customers by solving problems nobody else solves, isn’t it likely that at least some of those prospects will take them up on some of their offers, move through his sales system and become customers during the next 12 months. Brad said, “Well it would make sense that at least some of them would engage and buy.”
We then asked Brad “What is your average sale?” After some cajoling, we found out the average number of orders per year from the average customer is 25, and the average gross profit per order is $95. That’s an annual gross profit of $2,375 per customer. We then had to figure out how many average customers this hopper system would have to convert to at least break even on this tactical marketing plan. Here’s the math:
Divide $85,000 by $2,375. Answer: about 36 new average customers. That’s just 36 out of 3,500! That’s just a hair over 1%!
Here’s what the worksheet lets you do. You can adjust the numbers to see what works for you; up or down. Brad could choose to cut the postcards to once per month and half the cost of the printing and postage bringing his cost down to about $45,000 and send emails once per week or three times per month with essentially no difference in cost. At $45,000, his break-even is just about 19 new customers.
This worksheet allows you to adjust your numbers to see what works for you. This tool allows you to play the “what if” game to map out different scenarios.
Keep in mind you’ve got to test everything and test all the time. You can never be sure what worked well last year will work well this year. Emails are easy to ignore or delete. Postcards can be trashed nearly as easily. Radio and TV commercials may never be heard. Surprisingly, for many local companies, the Yellow Pages are not dead. However, if you don’t have a Yellow Pages ad and a prospect opens the book, you lose. You’re not even an option. On another page and in a video I talk about how to use the Yellow Pages and the Internet synergistically to win more customers.