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Sunday, May 17, 2009

Your marketing budget and plan

Sometimes the simplest and most common sense ideas fail to receive the attention they deserve. Here is one: You need a marketing budget and plan.

Checking this blog's archives, I find I haven't discussed this rather important and obvious element of construction marketing, at least in recent months.

You can choose to make the planning process complex, expensive and sophisticated -- and you can (as we do) engage all of your employees in the decision-making through open meetings and discussions.

But you can also keep it simple. And simple is often best.

Here is an easy-to-implement strategy which will allow you to pull together a marketing plan and budget within a few hours, at least in rough form. (You may need to investigate the details and that will take more time -- but certainly not so much time and effort that you will be distracted from your other responsibilities.)

Estimate your total desired volume of profitable business over the next year, and allocate 5 to 10 per cent of that sum for marketing. (The higher number applies more likely in a start-up, recession, or when you wish to plan an aggressive expansion.)

Add another 5 to 20 per cent for sales costs, depending on your margins, size of sale, and industry norms and traditions (if you aren't certain of these, check with your peers through your industry associations.) If your business is small, the sales component here may be your salary!

Your marketing costs ideally will be fixed, your sales costs should if all goes well be variable depending on results. (Commissions, referral fees, and the like are part of the sales budget. If you have salaried employees, you need to be satisfied your projected sales will at least cover their costs within the budget.)

Next, you need to determine how to spend this money. This is where you need to think for yourself, combining previous experience your own imagination and objectives. You may want to put all your eggs in one basket or allocate resources based on a variety of options. I would advocate focusing your efforts in a few places with a small 'slush fund' for experiments.

First priority

Internet/web presence/website with (effective) Search Engine Optimization -- 1 per cent or less.

You don't need to spend much here, and your results can be truly impressive. The cheapest approach is to study successful businesses in non-competitive markets and borrow their template, either perhaps by purchasing it from them, or reverse engineering using inexpensive offshore providers.

(Or you can use reference points such as your relevant trade associations or Internet forums such as to learn who can do the job. For example, although the design concepts originated locally, we built the Ottawa Renovates! site for approximately $500.)

Second priority

Structured and organized referral and repeat business initiatives. See the references here to how Toronto renovator Paul Danys turned a $5,000 dinner/client appreciation evening into $749,000 in businesss. Clearly, some thoughtful and programmed mailings and events, and possibly some referral commission systems, can generate plenty of business, at low cost.

Third priority

Other marketing and advertising options

This is where things get more difficult and challenging. Some contractors use flyers, some use radio, and some use association memberships and organized community activities. You may also consider trade and home shows. Some pay for leads services. (If these are paid in advance leads, I would put them as marketing costs; if they are commission-based leads, they might more accurately be put in the variable sales cost budget.)

Your strategies will depend on a variety of components, including local market conditions, your demographics, what has worked in the past, and (perhaps most useful) what your best current clients suggest. For example, while I would not recommend the Yellow Pages to most contractors, if they provided enough profitable leads for you last year, why not continue?

Now that you have a budget, you can spend the money. Obviously you may change things as the year progresses. Track your results. Don't worry about a day or a week (unless you know from experience that you should be able to measure your results for a particular medium or marketing approach quickly), but at least quarterly, assess the results from your media -- and if you aren't satisfied, be prepared to change.

Some additional notes:

  1. If you've been "relying" on repeat and referral business, these marketing costs may seem truly scary -- especially if you are just getting by. You of course need to price your services properly; build into your plans a price increase to more than cover the additional marketing costs. Then focus on the first and second tier activities because these will provide the greatest and best results.
  2. Maintain your discipline in your marketing budgets; If you need to cut, look for the fat in your discretionary (non marketing) expenses. Are you taking any 'extras' out of the business you can defer, and do you have employees not pulling their weight? Cut them first. Successful businesses actually increase their marketing budgets in recessions.

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