So, You Need A Marketing Budget!

By Michael Sick, Guest Blogger

While every company is unique, a common question among business owners is “how much should I spend on marketing?” The correct answer is…it depends. There are many factors to be considered to establish the optimal spending level for marketing and advertising. Here are a few issues to consider:

Industry Norms – Most industries have a “success model” that defines line item spending ranges.   Understanding this model is an important first step. Previous experience, feedback from other firms in the industry, or searches on the internet or trade publications are all good sources for this information.

 According to a report in Ad Age, ad spending in the United States as a percent of GDP was 2.2%.  That number is just for advertising and does not account for all marketing expenditures.  Marketing services (trade shows, research, consulting, design, production, staff, etc.) can often comprise 25 to 50% of the total spending.  McDonald’s (MCD) reports about 9% selling G&A with about half of that funding TV advertising.  Boston Beer Company (SAM), maker of Sam Adams beer spends 25 to 30% of its revenues on advertising, promotional and selling expenses.

Spending ratios are influenced by the business model for the industry.  Unlike lower margin business (consumer electronics or banking), high margin businesses (beverages and software) can afford to spend a greater amount of their revenue on advertising.

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“Fixed” Program– Some brands require a “minimum” level of marketing expenditures to be competitive. For example, a company may know that it needs to attend a given number of industry trade shows or regularly advertise in certain publications to maintain market share.   In this case, their budget is driven by a “fixed” set of expenditures.  As their business grows, these fixed costs will become a lower percentage of revenue.

Competitive Position – If Company “A” is in an industry where the norm is to dedicate 5% of sales to marketing, consideration needs to be given to the size of the competition.  If the company does one million dollars in revenue, an advertising budget at 5% results in $50,000 of expense.  If the other direct competitors have combined revenues of five million dollars and also spend 5%, they will spend five times the budget of Company “A”.  To break through the noise, consideration should be given to increasing the spending percentage, focusing the budget on a specific vertical customer segment and/or limiting the geographic reach of the marketing plan.

Growth Goals – If a company has aggressive revenue goals, they should consider the additional cash flow available for marketing generated by achieving the higher revenue goal.  Establishing the marketing budget as a ratio of the revenue goal is another approach.  Growing quickly requires increased working capital for inventory, staffing, and accounts receivable.  The prospect of increasing marketing spending can be challenging for high growth companies. Companies with plans to grow rapidly may need to spend a higher percentage of sales to achieve that goal.

Budgets in Recessions – Some companies find themselves losing customers and revenues during recessions.  A natural tendency is to reduce marketing expenditures to keep them “in line”.   If revenue is down 10%, should the marketing budget be reduced by 10%?  Logic dictates that if you reduce your budget by 10%, your revenues should fall by the same percentage.  Reducing marketing spending is likely to reduce the acquisition of new customers or jeopardize the company’s current share.   Brands should resist the urge to reduce marketing budgets in a recession.  Focus instead on improving the media mix, the creative or relevancy of the message. Recessions present an opportunity to gain market share, so look to reduce other expenditures first.

While marketing expenditures are recorded as expenses on the P&L, smart managers know that these expenditures are investments in the future.  The “Chicken and the Egg” dilemma is confounding for some businesses.  Which comes first, the revenue to support the marketing budget or the marketing budget to generate the revenue.  Your CFO and CMO are likely to answer that question differently!   They can probably agree, however, that revenues tomorrow are likely to be higher if you spend more on marketing and advertising today.

Setting a budget for marketing expenditures can be perplexing to business owners as the promised benefit is elusive.  Every business has a slightly different situation that needs to be considered to establish a marketing budget. Prospects generally need to be exposed to a brand multiple times before they are willing to change providers or make a purchase.  The Savvy marketing professional knows that it takes months, years even to nurture a prospect.    Optimizing marketing expenditures by benchmarking and tracking metrics specific to the company’s situation is the foundation for success. Reviewing the approaches discussed in this article is a good first step.  ITB Partners (www.itbpartners.com) has broad experience across many industries and domains, so we are capable of advising our clients on this subject and all other issues facing the enterprise.

Michael Sick, a nationally recognized, innovative management consultant specializing in strategic marketing, advertising, and business development. He spent 25 years in corporate marketing and was a Marketing Vice President for Jack In The Box, Pearle Vision, Arby’s and others. Currently, he serves as the part time Chief Marketing Officer (CMO) for some clients around the US. Learn more at:   www.itbpartners.com/michael-sick.html

Thank you for visiting my blog.  I hope you enjoyed my point of view and would like to receive regular posts directly to your email inbox. Toward this end, put your contact information on my mailing list.Your feedback helps me continue to publish articles that you want to read. Your input is important to me so; please leave a comment.

Jim Weber, President
New Century Dynamics Executive Search
Author of: Fighting Alligators: Job Search Strategy For The New Normal
JimWeber@NewCenturyDynamics.com

Current Assignments
1. COO- Atlanta-based Casual Dining Restaurant Company – New
2. Controller – Atlanta-based Consumer Products – Digital Company – New
3. Director of Biz Dev, Atlanta-based B2B Professional Services Company:    Completed
4. Payroll-Benefits Manager, Atlanta-based Retail Company:  Complete
5. Senior Accounting Manager – Atlanta-based Manufacturer. Complete
6. Controller – Atlanta-based Restaurant Company: New
7. Outplacement Assignment – Atlanta-based Manufacturer:  New

    Further Research Into Social Media and Talent Acquisition.

    My most recent posts have extolled the virtue of employing a social media strategy for talent acquisition.  This week I decided to do some further research in this connection. I begin with phone calls to a couple of my clients.  I wanted their input and to learn what they’re doing. After a few conversations, I began visiting their websites and social media pages.  I even built an Excel Spreadsheet to capture the data I thought might be relevant.  What I learned was most interesting, leading me to believe that I must pursue this line of analysis further.

    As I have a somewhat diverse client base, I was able to see top line results across various industry sectors.  My clients range from retail to consumer packaged goods,  business to business services, and manufacturing.  All of these companies are using their websites to attract potential employees. Some have a more robust presence than others in this regard, however, all are posting jobs and providing a vehicle to take applications from job seekers.  A few of the consumer brands are using their website to build a community of career minded followers. It was interesting to note, however, that none of these companies provided a compelling reason for anyone to join their team. There was no call to action.    It was as if to say; yeah we have positions to fill, and we might be interested in talking with you if you want to talk to us.  That was common across all platforms.

    With one exception, all of my clients are using LinkedIn to promote their company. There is a wide range of effort in this area, but it is fair to say that none has a particularly strong presence on LinkedIn. Again, there was no evidence of a strategic message for talent acquisition by any of these brands.

    Only one of these companies, a manufacturer, doesn’t have a presence on Facebook.  Otherwise, there is substantial evidence that they are making good use of social media. There is a lot of variation in the frequency of their messaging, but they are all working to develop a community of engaged followers.

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    All of these brands are active on Twitter as well.  The consumer oriented brands are generating the most activity and followers. The manufacturing company scored lowest on activity level whereas the CPG brand is “rocking it.”  With the exception of the manufacturing company, each of these firms also maintains a presence on Instagram and Pinterest.  That was a pleasant surprise, but understandable as those platforms are consumer oriented.

    My Clients recognize the importance of leveraging their presence on the Web to support their talent acquisition goals.   Some are further along than others, however, each has established a beachhead. They have extended their reach and are becoming more experienced.  I suspect there is a budget issue in play here as well.  Generally speaking, the larger companies have a bigger social media footprint.  They must recognize the value of this medium and have resourced their efforts.  A notable exception is the smallest company which has made the greatest commitment to social media.  Of course, that could be because it is a CPG-Digital company that markets its products on the Web. Even so, it is most curious that they don’t offer a compelling message to attract potential employees.  They provide the process to make it easy for the motivated job seeker to make an application or to send a resume but offer little encouragement.  None offered a compelling reason to consider a career with their company.  Their message is directed toward their retail customer and prospective customers, but not prospective employees.

    I found this to be a very useful exercise which requires further investigation.  I made an effort to follow each of these companies on Twitter and LinkedIn.  I also gave them my email address to receive their marketing communication.  I am eager to learn about their messaging.  It will be fun to watch their progress.

    Thank you for visiting my blog.  I hope you enjoyed my point of view and would like to receive regular posts directly to your email inbox. Toward this end, put your contact information on my mailing list.Your feedback helps me continue to publish articles that you want to read. Your input is important to me so; please leave a comment.

    Jim Weber, President

    New Century Dynamics Executive Search
    JimWeber@NewCenturyDynamics.com
    Author of: Fighting Alligators: Job Search Strategy For The New Normal

    Current Assignments
    1. COO- Atlanta-based Casual Dining Restaurant Company – New
    2. Controller – Atlanta-based Consumer Products – Digital Company – New
    3. Director of Biz Dev, Atlanta-based B2B Professional Services Company:    Completed
    4. Payroll-Benefits Manager, Atlanta-based Retail Company:  Complete
    5. Senior Accounting Manager – Atlanta-based Manufacturer. Complete
    6. Controller – Atlanta-based Restaurant Company: New

    7. Outplacement Assignment – Atlanta-based Manufacturer:  New

    Crafting A Social Media Strategy For Talent Acquisition.

    Why do you rob banks? Because that’s where the money is.”  Willie Sutton

    There are many good reasons to employ a social media strategy to support a talent acquisition program.  Although the above-referenced quote attributed to Willie Sutton is in dispute, he would understand this opportunity, as social media is where the people are.  A lot of people are engaged on social media platforms, many of whom are searching for new career opportunities.   This is especially true for LinkedIn.  It is common to see messages from my LinkedIn network announcing job openings within their companies. Sometimes these messages appear to be coordinated through Human Resources, other times not so much.   Likewise, job seekers are using LinkedIn to get their message out.  Other social media platforms like Facebook, YouTube and Twitter offer opportunities for recruiting activities as well.  However, the most compelling reasons may be to maintain control of one’s brand message and competitive advantage.

    In many ways, brands have little choice but to use social media for recruiting and selection purposes.
    Their employees are already engaged over various platforms, especially LinkedIn, representing the brand one way or another without supervision or direction.  Furthermore, the competition is probably using social media to recruit their employees.  There is competitive pressure for employers to be active on social media to achieve their recruiting goals.

    If a company decides to engage in the use of social media to support its talent acquisition program, developing a well-defined strategy is in order.  The place to begin is by establishing a clear understanding of the demographic composition of the target market, prospective employees.  Management must understand its audience and their career interests.  What are their needs?  What is the company’s value proposition?  Does it resonate with the target audience? What is the protocol for developing relationships?  This information will help you determine which social media platforms would yield the most favorable results.   The next step is to dedicate resources to execute the strategy.  The financial budget must support the recruiting goals for the organization.  It would be wise to assemble a cross-functional team with representation from HR, Sales and Marketing, and social media experts.  The plan must have a long term component, for branding, and an immediate component for current staffing needs.  The brand’s involvement must be continuous

    A social media strategy should be implemented with care.  Social media platforms are highly visible and can be incredibly powerful, however, there is a downside risk to be acknowledged. Once involved, the brand becomes open to criticism and potential controversy.    Becoming politically active is an obvious risk which has the potential to alienate customers and potential employees.  Even an association with certain causes or charitable programs may be problematic.  Active participation on social media can be an opening for criticism of the companies activities so caution is recommended.

    When a brand has established a viable social media strategy that is properly resourced, the team can formulate a plan to generate followers and keep them engaged.  Some obvious ways to engage prospective employees may include:

    • Company news: new products, promotions, new technology, etc.
    • Industry news: what’s going on in the industry and how the company is adapting.
    • Employee news: promotions, new corporate initiatives, training programs, benefits, other kinds of recognition.
    • Messages from key executives about the health of the company and prospects for the future.

    The whole point of a social media strategy is to engage customers who will purchase the company’s goods and services and potential employees who may want to join the team.   The messages should be compelling enough to capture the interest of the followers.  They must be posted with regular frequency to keep the followers engaged.  

    It is important to remember that using social media to support a talent acquisition strategy is a component of an overall recruiting strategy.  It is another method of sourcing and engaging potential employees.  Using Social Media is not a substitute for all other recruiting programs.  All of the rules for effective recruiting and selection still apply.    
    Thank you for visiting my blog.  I hope you enjoyed my point of view and would like to receive regular posts directly to your email inbox. Toward this end, put your contact information on my mailing list.Your feedback helps me continue to publish articles that you want to read. Your input is important to me so; please leave a comment.
    Jim Weber, President

    New Century Dynamics Executive Search
    JimWeber@NewCenturyDynamics.com
    Author of: Fighting Alligators: Job Search Strategy For The New Normal

    Current Assignments
    1. COO- Atlanta-based Casual Dining Restaurant Company – New
    2. Controller – Atlanta-based Consumer Products – Digital Company – New
    3. Director of Biz Dev, Atlanta-based B2B Professional Services Company:    Completed
    4. Payroll-Benefits Manager, Atlanta-based Retail Company:  Complete
    5. Senior Accounting Manager – Atlanta-based Manufacturer. Complete
    6. Controller – Atlanta-based Restaurant Company: New

    7. Outplacement Assignment – Atlanta-based Manufacturer:  New

    Social Media Is A Game Changer!

    During my career working for major retail brands, I knew the value of advertising on radio and television.  Also known as major media, we could see the results of our buys, almost in real time. However, I understood the cost and limitations of traditional media.  Successful advertising was all about the message.  A lot of money could be quickly wasted if the message was not relevant.  Social media has changed the game, especially for small business.  These tools allow smaller companies to leverage their marketing budget to compete on a larger stage.   It gives them a voice they could not achieve through major media.  They can dialog with customers and prospects in a cost effective way.  It is akin to the difference between a rifle and a shotgun.   I have found social media to be very helpful in building my business.

    Executive search is an interesting business.  I am hired by employers, my clients, to find people who want to become their employees.  One could say that I am selling prospective employees, so I guess Job Seekers are my inventory.   Often, candidates become clients and vice versa.   Over time, I have become more productive as my industry knowledge and relationships have grown.  These relationships serve to generate more contracts and to complete assignments faster.    My business is not unlike any other service-sector business as success is all about building lasting relationships.  I learned that building and managing a large network is a viable strategy to build my business.

    Early on, I recognized the value of talking to my clients and prospects.  I created a database of followers and invited people to sign up for my periodic updates. By today’s standards, it was fairly primitive. I used Microsoft Outlook to manage my list, and mail merge.  It began as a collection of clients and prospects.  In time, as I received more unsolicited resumes, I added job seekers to my outreach.  Later, I added strategic partners.  I would tell these folks about my new assignments as well as assignments I had completed. That activity generated new business and more followers.  I was an early adopter of LinkedIn and became involved with Facebook and Twitter.  I didn’t understand the full potential of those applications at first.  However, now I am a believer.  I even migrated my email marketing campaign to Constant Contact and Mail Chimp.

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    I learned the importance of blogging to engage prospects who needed employees, and to professionals who are interested in career advancement.  The focus of my blog is on career issues facing Baby Boomers, my prospective candidate base.  This is an important target audience, as they represent my primary placements.  When I began blogging, social media became even more important.  I began using Twitter to generate interest and to direct readers to my website.  I subscribed to Hootsuite to expand my message to my followers on LinkedIn, Facebook, and Google+.  I believe my experience with executive search is relevant to all small businesses.  It is an effective business practice to maintain contact with customers, prospects, and prospective employees.

    Now that I am building a Consulting Company, I am using the same digital marketing techniques to promote this line of business.  In fact, I have adopted the social media platform I built for my executive search business to present this opportunity to my network.  The results of this effort have been remarkable.  I use social media to speak to prospective clients and to freelancers who may be interested in joining our company.

    As I have done with my business, small companies should consider for theirs. Build a community of prospective job seekers.  Last week I talked about using the company website to generate interest in employment opportunities.   In the same way that one would reach out and cultivate prospective customers, companies should be talking to prospective employees to build a following.  Maintain their interest in your brand for future employment opportunities. Depending on the nature of the business, prospective employees could become current customers.  Social Media is an excellent way to engage these people.

    Thank you for visiting my blog.  I hope you enjoyed my point of view and would like to receive regular posts directly to your email inbox. Toward this end, put your contact information on my mailing list.Your feedback helps me continue to publish articles that you want to read. Your input is important to me so; please leave a comment.
    Jim Weber, President

    New Century Dynamics Executive Search
    JimWeber@NewCenturyDynamics.com
    Author of: Fighting Alligators: Job Search Strategy For The New Normal

    Current Assignments
    1. COO- Atlanta-based Casual Dining Restaurant Company – New
    2. Controller – Atlanta-based Consumer Products – Digital Company – New
    3. Director of Biz Dev, Atlanta-based B2B Professional Services Company:    Completed
    4. Payroll-Benefits Manager, Atlanta-based Retail Company:  Complete
    5. Senior Accounting Manager – Atlanta-based Manufacturer. Complete
    6. Controller – Atlanta-based Restaurant Company: New
    7. Outplacement Assignment – Atlanta-based Manufacturer:  New

    Talent Acquisition: Put Out The Welcome Sign!

    A week ago Thursday, my colleague David introduced me to the principals of a small design-build company. These folks have a bit of a conundrum. Last year they hired an individual to fill a key position, however that person is not performing to their standards.  He requires too much supervision and follow-up. The principals are having to cover much of his workload. They’ve decided to replace him and wanted to talk to me about conducting a confidential search. These folks have never hired an executive recruiter so they are curious as to my background and method of operation. They also want to know the cost of my services.

    During our meeting, they spent a lot of time talking about their expectations for successful job performance and the shortfalls of the incumbent. They talked about the process they used to recruit him, including compensation and qualifications. It was clear to me that there was a major disconnect between the strategic importance of the position, the experience and skill set required, and their compensation package. Frankly, this is not uncommon for a small company.

    Note: Successful companies are always recruiting talent, even if it’s nothing more than networking and cataloging potential hires.

    The following Monday morning, David called to advise me that the prospective client had been presented with the employee’s resignation. Now they are really in a pickle. This is a key position that needs to be filled immediately.   Productivity will suffer along with customer satisfaction.  Their P&L is sure to be affected.  They are serious about a search engagement and wanted to schedule a phone call with me to finalize an agreement.

    The fact that the incumbent offered his resignation came as no surprise to me. When the relationship between employer and employee becomes strained it is mutual.  Surprisingly, many employers fail to grasp this fact.  I am equally confident that if I was to do an exit interview with this employee, he would say the job wasn’t what he expected either.

    When we had our conversation later that day, I got a clearer picture as to their thinking and how they wanted to proceed.  I learned that they want to pursue a parallel path evaluating the acquisition of a W-2, regular employee, or a 1099 contractor. They also gave me a sense as to their cash flow situation and budget parameters for the search.  I told them that I would outline a proposal for their review before noon the next day.

    The smaller the company, the more critical turnover becomes.  They typically have little excess staff.  They are totally focused on work at hand and business development to the exclusion of an active recruiting program. This is understandable, if not something of an extreme case.  An active recruiting program is an effective insurance program.

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    Larger, more stable companies have the same issues as my perspective client. Working on an engagement last year, I quickly learned that the client underutilized the talent acquisition value of their web-site.  They did not feature a “careers” tab prominently on their main menu.  In fact, it was inconspicuously buried as a sub menu item. This company has had difficulty with ongoing recruiting, yet failed to put out a welcome sign for prospective team members. This was easy to correct. The follow-on step was to add a plug-in that collected resumes and job applications from interested candidates.

    Minimizing the risk of turnover should be a priority for all organizations.  Putting out a welcome sign to attract prospective employees is the starting point.  A prominent page on the company website and on social media is ideal.

    Thank you for visiting my blog.  I hope you enjoyed my point of view and would like to receive regular posts directly to your email inbox. Toward this end, put your contact information on my mailing list.Your feedback helps me continue to publish articles that you want to read. Your input is important to me so; please leave a comment.

    Jim Weber, President
    New Century Dynamics Executive Search
    JimWeber@NewCenturyDynamics.com
    Author of: Fighting Alligators: Job Search Strategy For The New Normal

    Current Assignments
    1. COO- Atlanta-based Casual Dining Restaurant Company – New
    2. Controller – Atlanta-based Consumer Products – Digital Company – New
    3. Director of Biz Dev, Atlanta-based B2B Professional Services Company:    Completed
    4. Payroll-Benefits Manager, Atlanta-based Retail Company:  Complete
    5. Senior Accounting Manager – Atlanta-based Manufacturer. Complete
    6. Controller – Atlanta-based Restaurant Company: New
    7. Outplacement Assignment – Atlanta-based Manufacturer:  New