Ensure Your Budget Delivers the Best Possible ROI
Setting and spending your marketing budget needs to have a focus on driving sales, not simply following them.
Resource allocation is a critical aspect to effectively running every area of every business, and the marketing department is no exception to that. Like any component of procurement, there are two fundamental questions to ask: How much to spend, and what to spend it on. It sounds simple enough, but it is easy to follow blind alleys and approach the dilemma from the wrong angle.
We have seen numerous approaches taken to budget allocation for marketing in Essex based companies, but those who get the optimum return are the ones who let the marketing drive the sales, as opposed to letting the sales dictate the marketing.
Putting the cart before the horse
Business strategy needs to have a firm grip on cause and effect. For example, customer demand should drive the products and services you deliver. However, you still see businesses trying to produce what they think people should want and trying to drive demand. The same can happen with marketing. The whole point of spending money on
marketing is to increase revenue. Using last year’s revenue to dictate this year’s marketing spend, for example by setting the marketing budget at 10 percent of revenue, is clearly another case of putting the cart before the horse, or mixing up cause and effect.
Using data to deliver insights
We live in a brave new world of big data analytics. There is more data out there, and on more topics, than ever before, and businesses can use it to make better insights and smarter decisions. Regression modelling is a preferred technique among statisticians that has been used time and again to examine “what if” scenarios. The more data you can feed into the system, the better the results it can deliver. And the beauty of it is that it is all based on data that is specifically tied to your company and industry sector.
Getting ahead of the curve
Regression analysis allows business to plot marketing spend against potential return, and when mapped out, this produces a response curve that initially climbs steeply, then starts to level out. It literally reaches a point where throwing more money at the marketing effort delivers diminishing returns. Understanding how these curves are plotted is the most logical way to assess the optimum marketing spend, because it uses data that considers cause and effect in the right way.
The “how” as well as the “how much”
Plugging all that sales and marketing data into a regression model and concluding that you need to spend an optimum £1.37 million on marketing is great as far as it goes. But clearly, there is more to be understood, and it’s no use running off and spending the money like a kid in a sweetshop. Data analysis can, again, help us here. Provided you have information to hand on different types of marketing spend, you can map several curves relating to different campaigns, for example social media marketing, TV ads and radio ads.
Regression analysis is a powerful tool, but it requires two things in abundance: relevant data and some clever mathematics. Today, technology brings both of these things within easy reach of anyone.