Marketing Budgets: Investments vs. Expenses—a Big Difference
I’ve been looking at marketing budgets for more years than I can count. One thing always gets my attention. Where the money is spent—and how it is spent. For many of those years I either was the one spending the money or the one who had to approve the expenses. I figured out that there are 3-5 kinds of expenses that find their way into every budget and every spending action that follows.
- “N”—Necessities—items you must have: These are items that you need to operate effectively and efficiently and can range from office and staff to cell phones and copiers to insurance. There’s no need for me to list all of those necessary items, because you already know what they are. You also know, deep down, which of the so-called necessities are really just “niceties!” Sam Walton proved it didn’t take fancy offices and premium hotel rooms to build a huge and successful business. The same goes for an excessive number of subscriptions (the Wall Street Journal is expensive!) and dues. Country Club & City Club memberships are usually invitations to spend too much in niceties—and don’t tell me about entertaining clients—they can see the waste of money and wonder why you don’t just give them better prices!)
- “C”—Expenses that must be carefully controlled (or it’s a waste): On top of my list is trade-show attendance. These are one of the greatest opportunities to waste money in any budget. Take too many people, far more than are necessary, house them in nice hotels and then dine out in a group at expensive restaurants, and the expenses mount up fast. Assuming show attendance is necessary at all, it has to be carefully managed. The same goes for certain kinds of advertising, promotions and collateral materials. Some trade ads actually are beneficial. Many are not. Some consumer advertising is important, and some is an ego trip (Does the Super Bowl come to mind?) If many of the Sales and Marketing staff are carrying expensive briefcases with the company logo and their initials embossed, somebody just wasted a bunch of money. If the question is asked, “How does this expenditure increase sales and profits?” and the answer is a lot of “hemming and hawing” you can be pretty sure it doesn’t—and thus it is waste. Cut it out of the budget.
- “I”—Spending that is an Investment—in the present and/or the future:New product development—design, prototypes, etc.; well thought-out market research; targeted advertising with measured outcomes; sales calls to the offices of customers where meeting are scheduled in advance and include senior management. These are all expenses that are, in fact, investments in present or future revenue and profit. So are brand building expenditures that are planned to accomplish a specific purpose and then checked to see if they did so. Brands are very valuable—perhaps more so than ever—as both a reputation label and point of differentiation (call them Intellectual Property, if you’d like.)
I could list more categories, but I don’t want to insult your intelligence. Some budget items are simply laughable if they weren’t so common and wasteful. My category for them is “W”—Waste! You know the ones I mean, don’t make me list them. Then there are the clear throwaways, and I just call them “E”— for Eliminate
So, when you are compiling your next budget, and/or reviewing one that is your responsibility, just check off the items and put one of these letters next to each account: W-I-N-C-E. It conveniently spells out the word “Wince,” which is what I have often done when I see the nonsense people stuff into budgets. These are tough times, and you need is to spend precious resources on thing that will make you WIN, and not WINCE!