 By Andy Havens, Marketing Management Consultant and co-founder of Sanestorm Marketing. Visit www.sanestorm.com for free marketing tools, articles and our non-newsletter. He can be reached at 1.877.SSTORM1 and andyhavens@sanestorm.com.
Years and years ago, I had a boss/mentor who made me learn how to budget. Note the usage – "learn to budget," not, "learn the budget." I initially didn't get the distinction.
She sent me the overview information from the year before for a $2 million direct mail budget. There were 12 different accounts, predictions for customer activations, and estimates of how printing and postage costs might be changing. I did what I thought was a neat little job of putting all of that on one page and handing it back to her well within deadline.
"Where did you get your numbers for next year?" she asked.
"I got the customer forecasts from Finance, and I put in best-guess printing and postage changes from our vendors."
"Right. But where did you get the numbers on printing costs for each type of piece – for fulfillment, for order-taking, for the seasonal pieces – you know: the basis for all our costs."
Suspecting that this was not the right answer, I answered, "I got them from last year's budget."
She shook her head and half-smiled, half-smirked. "I need you to know why each of our expenses costs what it does. The budget isn't just for giving Finance an idea of what we'll be spending. It's a way for us to measure our efficiency and productivity. Don't just understand the budget. I need you to be proficient at everything that goes into it."
How could I tell when I had become proficient? Stay tuned.
Are you building without a blueprint?
I have an uncle who builds houses. No cookie cutter stuff; they build to plans that their customers have a hand in developing. That's great for customization, but a pain when people suggest, "Let's move the bathroom to the end of the hall instead of right next to the kitchen, OK?"
In the mind of the customer, "bathroom" is a fixed, self-contained idea. For my uncle, it connects to the plumbing, the electrical, the HVAC system, etc. You can't just pop it out of one place and into another. To make this clear to customers, he shows them a detailed blueprint of the house. That way they can see all the connections and understand why it will cost $12,000 to move the bathroom.
It's the same way with a marketing budget. Questions a proficient marketer would ask about a particular advertising buy might include:
· Why are we advertising in this particular pub?
· What's their demographic and reach?
· What premium do they charge for color?
· What's our best frequency discount?
· Can we get this year's rates for next year if we lock in early?
That's a lot of questions. But if you don't know the answers, how will you respond when management suggests you cut it? You're hosed. But when you do know the answers, firing off a well-informed response can be the highlight of your week:
"We can cut that. But we moved money there because they reach executives in the construction industry. We're getting full-color for free because we're sponsoring their spring seminar. They need a law firm to cover the asbestos and mold topics, and we've got dibs on providing two speakers. The toxic tort group is working up a binder to hand out. But we can cut it if we have to."
That's a great moment. When you budget (verb) something for a reason, you need a reason to un-budget. When something just sits in the budget (noun), it's easily dismissed.
That's folding money
Two years after my boss made me "get it," I was working on a new collateral budget and the cost for one of the pieces struck me as odd. So I had the agency work up an alternate demo for me to run past my VP.
"Which of these is better?" I asked, handing him the two versions. He looked at them both for a minute and then said, "This one… the one with the tabs."
"I agree," I said. "But is it $1 million better?"
I believe his exact response was, "Spoo-dee wot-da?"
"Yeah," I replied. "Based on forecasts, we'll burn through a million of these next year. Die-cut tabs means we have to spiral bind. Lose the tabs…"
"And we save a-million bucks. And that's folding money. Do it. Good work."
That was the day I knew I was proficient. Felt real good. Master your budget and you'll feel that way, too. |
RSS FEED
