No More Marketing Budgets Please
Marketing budgets are not a thing. Really, they aren’t. If you have one, it needs to go. Here’s why…
Imagine this scenario. You give me a dollar today, and I give you $1.10 back. That’s a 10% return on investment. This is a scenario you be willing to play out all day every day. Am I right?
Your marketing efforts should equally provide a return through advertising and other efforts. Your program should largely be measureable and if it’s providing a return, it’s basically a money machine. A well devised program should continually increase in scale to yield more profit. If your money machine is working, why would you limit it by placing a cap? Unleash the beast!
5 Common Reasons for a Marketing Budget
Reason #1: Protecting against losses
Often a marketing budget is enacted for under-performing programs. To protect against losses, management will create a budget to limit the amount of exposure a business has with running campaigns either by channel or across all of them. Don’t protect losers. Support winners!
Reason #3: The business plan
Whether a business is considered a startup or an established enterprise, a business plan often dictates that there should be a marketing budget. After all, we have budgets or better yet, predicted costs for other things such as employee salaries, rent, insurance and other costs related to the business. Marketing is fluid. It’s a two way conversation, not a static line item.
Reason #3: You don’t have a strategy
Most likely you have a budget because you don’t have a strategy. A budget is a simple way of creating the semblance of a strategy by helping bucket costs into groups like digital marketing with advertising, SEO (search engine optimization), SEM (search engine marketing), content marketing, offline promotions, branding and TV or other media. A marketing manager has to decide how to allocate funds strategically. The reality is, this is not a strategy. A strategy has an outcome and then steps to get there. It’s iterative and focused. Budgets aren’t plans.
Reason #4: There has always been one
Marketers coming into an organization or taking over a budget can feel stifled by how things have run historically. Stepping into a new role comes with baggage, expectations and bias. If there has always been a budget, it can be difficult to initiate change. Businesses that are stagnant and not evolving die. Don’t be a statistic. Stay relevant
Reason #5: You don’t know what else to do
Marketing budgets provide structure and safety. They feel like an accomplishment. Whether you are new to marketing or experience, deciding what to do next is hard. Working with a budget is fulfilling as you find your way.
No budget? But why?
Let’s rethink the marketing budget. I am not advocating recklessness. If fact, I’m suggesting a careful and metered approach to marketing. A budget does not answer questions about what is working well and what we could be doing better. In order to answer the question “how should I be allocating money to allocating” we need to employ test-based marketing. Budgets don’t make us better, tests and understanding do.
Test Based Marketing
Each test is its own budget with a hypothesis. We either prove the hypothesis, prove that it was incorrect or determine that we need more data. Tests have a finite amount of time and money but by no means only happen once.
Test-based marketing approaches allow us to learn, iterate and grow our business. Once we learn what works and understand why, we can repeat with confidence. No marketing program can continue on auto pilot and there is always room to do better.
Test based marketing budgets force us to evolve and adapt to the market and our customers. We can cater our experiments to our level of risk tolerance. We won’t always be right and when we are, what works today might not work tomorrow.
Your business deserves to move away from marketing budgets and to start focusing on tests. Be clear on your goals, measure objectively and ensure you can achieve the proper scale to get meaningful data and results. If you’re interested in test-based marketing or planning your strategy I’d love to talk with you and share ideas.
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Also published on Medium.