Discretionary spending and marketing

Charles is my newest nagger. He's keeping a close eye on the company books, helping to impose some discipline in our operations. And lately he has been reminding me at every occasion that every dollar in discretionary spending requires $7.35 in revenue to offset.

In other words, he says if I buy a business book for $20.00, I should appreciate that we will need to spend $147 to pay for it.

"Go to the library," he said. (And I have, and picked some really interesting books I'm reading now that will cost exactly $0.00 in sales to read).

So what do you do about your marketing budget?

The advertising, new business cards, website redesign, your business lunches with important clients, golf games, and so on are all discretionary expenses. You can spend them or cut them, often at the drop of a hat. (Your rent, employee's salaries, and the like are much less discretionary -- sure you can change these costs, over time, but they are much more fixed than discretionary.)

Of course many discretionary expenses make real sense IF they will help you achieve the sales to the ratio you find is right for your own business. If our business spends $100 on advertising and achieves $735 in new sales, we're fine.

When you look through your discretionary expenses, you'll likely find real savings, however, on the things you don't really need, your "nice to have" luxuries, your lazy purchases because they seem small -- but aren't so small when they recur every month. And sometimes you find surprises.

For example, we've been spending about $200 a month on Constant Contact fees for our e-letter. Not much for a multi-thousand dollar business. I brought the fees down by $75.00 a month simply by removing invalid emails and some really old names, reducing the list to below 10,000.

Good, you might say, but could we do better?

I noticed that only about 20 per cent of the people receiving my emails are actually opening them. What would happen if we took measures to boil the list down to the number of readers who really want the emails. Now the list is less than 5,000 -- and the Constant Contact fees will drop even more.

But has our effectiveness diminished? Not one bit. We simply aren't spamming people who don't want the emails but haven't bothered to simply say "stop".

In watching your discretionary expenses, don't cut your marketing budget. Just make sure you are spending it where it will provide you with results and real value.