By Andrés Uribe, Expedition PR
Whether you’re a startup or an established company, choosing an appropriate budget to promote your product/company can be a difficult task at times. Here are two points to consider when preparing this budget:
Do: Consider your goals. The first step of an effective marketing and PR budget is to consider your goals and how much it takes to achieve these goals. For an established company, this means looking at historical data to determine your customer acquisition cost (CAC). For a startup, this will be more of an estimation exercise, but still none the less important.
Once you have a CAC in mind, start thinking about how many new customers you want. How many new customers can your business handle? How much profit will each of these new customers produce for your company? Is it more than your CAC? If not, you want to start thinking of a way to lower your CAC or increase the profit you can expect from each customer before going ahead with your promotional plan.
Don’t: Base marketing and PR spend off a percentage of revenue/funds raised. While it might seem natural for a growing company with steady revenue to take, say 60%, of their revenue and invest it back into marketing and PR; Or for a company fresh with venture capital to base their spend off a percentage of funds raised. This is a flawed approach that will land you in trouble should your company’s revenues decrease or future funding rounds not be as large as your first.
While a company might be doing fine during the growth phase, increasing revenue and in turn increasing marketing and PR spend to further grow the business; a single bad quarter/year (depending on how often you reevaluate your budgets) can trigger a sort of death spiral. One bad period means a lower promotional budget for next period, which can lead to lower revenues, which leads to a lower budget the following period…repeat. Not a good scenario.
Ultimately, the budget you decide on should start with your goals in mind and be adjusted slightly, if at all, based on the funds you have available, and not the other way around.
Once you decide on a budget, it’s time to start thinking about how to spend that money. As you can tell from this article, I believe marketing and PR activities should be very closely tied and are equally important when promoting a company and driving sales. Allocate spending to both when promoting you product/company for optimal results.