The 70/30 Marketing Rule

Are you a CMO or marketing manager who is consistently shut down by management when you try to allocate your marketing budget into strategies that actually have a chance of bringing in revenue?

Or are you an executive who is completely frustrated that your marketing team can’t deliver MROI (marketing return on investment) on anything?

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Calculator and budget

We have a theory.

Having spent most of our careers in corporate marketing departments, we have zero problems publicly stating approximately 33% of every marketing dollar is completely wasted. We have witnessed this phenomenon and believe it is endemic of most corporate marketing departments.

We deem this statement “33% of every marketing dollar is completely wasted” is an incontrovertible fact.

We oversaw corporate marketing budgets from the inside. We ran the monthly expenditures. It’s not rocket science to follow the money.

Today, we are about to make another somewhat controversial proclamation.

Most corporate marketing departments are running on what we will call the 70/30 budgeting principle. They spend 70 percent of their budgets on intangible activities or non-converting events and 30 percent of their budgets on activities that actually bring in dollars.

News flash: Brand equity is intangible; it can’t be measured. 

The way to have high brand equity is to integrate your marketing communications (one voice, one message, multiple mediums) by creating campaigns that are focused on bringing in revenue.

The old ways of measuring marketing are more or less dead. We live in a data-driven world. Between things like metrics, analytics, and CRM systems we should, at all times, have at least some concept of how our marketing campaigns are being converted into incoming dollars.

The only area of marketing where this may be to difficult to track is offline advertising. But advertising should be used as a reinforcement of your brand, not as a way to bring in customers. Advertising reinforces the concept of your brand that is already in your target audiences’ minds.

So why is it that executives keep asking their internal marketing teams and external marketing partners to focus on intangibles? They refuse to pay for campaigns and events that actually have the ability to bring in revenue because they are too busy throwing good money after bad on the elusive brand equity.

If you position your business correctly, then the issue of brand equity becomes a moot point because every marketing move you make is reinforcing the position you already hold in your prospect’s mind.

(If you are in business and have not yet read Al Ries and Jack Trout’s seminal Positioning: The Battle for Your Mind we highly encourage you to grab a copy. Full disclosure: as an Amazon Associate we earn from qualifying purchases).

The next budget suck that contributes to that 70 percent is the event sponsorship.

How many times have you had this conversation:

Marketing Manager: “I don’t think we should sponsor EVENT X. Last year we spent over $65K just on the sponsorship and we got not one piece of business in return.”

Executive: “We have always sponsored this event. People expect us to sponsor this event.”

Marketing Manager: “I understand that we have always sponsored this event but the attendees have changed. They now have so many sponsors that our prospects are actively avoiding the tradeshow floor. Why don’t we just send our sales team under the conference registration (which we are doing anyway) and stake them at the hotel bars, restaurants and by the elevators in order to really talk to potential clients.”

Executive: “Well we are planning to send 22 people and we expect at least 12 of them to set up meetings for the event but people still expect us to be on the tradeshow floor so we are still going to sponsor. End of discussion.”

Total cost for the event including sponsorship, travel, hotels, etc. about $100k

Three days after the event the sales team completes their after-event action reports. Of the three thousand attendees at the conference, your tribe of 22 people brought back 19 business cards. Seven of them from the same company (who you already know is never going to be a viable client).

Someone needs to stop the spending madness!

We have a simple rule that we follow at Strategic Tactics Consulting Group (STCG): “If it’s not going to make money, why are we doing it?”

The whole reason businesses exist in the first place is to turn a profit.

So, how do we stop the madness?

We advocate for zero-based budgeting when it comes to marketing. What you did yesterday (or for the last ten years) has no bearing on what gets approved today.

Each marketing expenditure should be looked at on its own merits like:

  • Does this expenditure align with our goals to get in front of our target audience?
  • Does this expenditure fit with our Position (i.e. brand) in the minds of our customers and prospects?
  • Have we done this before? What was the MROI?
  • Will spending this money improve our brand in the eyes of our prospects and customers?

Now you may be saying to yourself isn’t that last point an intangible?

Yes, but you need to look at context. Co-hosting an event with a non-profit organization that helps children with cancer is not a money-making endeavor. It’s a good-will endeavor. People (i.e. prospects and customers) like to work with organizations that believe in corporate social responsibility. Goodwill in your prospect’s minds is never a bad thing.

You don’t have to give up all of your intangible marketing activities, you just want to make sure that your non-revenue producing activities are less than your revenue producing activities.

If you think that your marketing budget is completely out of control and need a budget intervention please reach out to us today at info@stcgllc.com to schedule a consultation.

 

Angela M. Insalaco is the Founder and Managing Director of Strategic Tactics Consulting Group, LCC and The Reputation Factory. She has spent over a decade managing corporate marketing department budgets and expenditures.

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