It's been our experience that management (manufacturer,
integrator, distributor, dealer), depending on the level of
sophistication, wants one of three types of advertising budgets.
The first type is a budget the agency is told they have to work
with to promote the company, products and services. It's up to
them to tell the agency how they are going to do it--and make
sales for four new product areas rise 50 percent.
The second is somewhat of a management-by-objective
approach. However, so much time is spent reviewing total dollars
that each individual item is examined until the forest can't be
seen through the trees.
The third one, however, is a creative, viable business
tool.
All too often sales goals are learned after the fact.
Budget, therefore, is created emotionally rather than scien-
tifically. As a result, the agency has to work backward to
develop some semblance of budget to help achieve those goals.
There isn't a responsible management group around that
doesn't have a three- to five-year business and marketing plan.
However, it's rare that a company has a three- and five-year
MANAGEMENT BY OBJECTIVE, NOT DOLLARS (cont.)
advertising/promotional plan. If you don't have realistic
advertising goals for that type of period, all you're doing is
struggling from year to year. You often find you've even lulled
yourself into a pattern that is dull and repetitive. In fact,
your program isn't really keeping pace with the company.
While most companies talk about an annual advertising
budget, when they're really talking about is a seven-month
program. That's because they never budget for the first quarter
of the coming year's efforts. By the time next year's budgets
are approved and news ads, sales literature and other items are
being prepared, it's well into the second quarter.
We feel that in developing a budget, it's better to use the
task method. Rather than tie yourself down to last year's
figures or some percentage of anticipated sales, determine what
is needed to accomplish the year's objectives.
Throughout the year, keep an active budget file for the
coming year. Put in notes, thoughts, possible projects and
records. Then review it periodically to see if the projects
should culled, if they are still good or if they should be pushed
out even further. Even if a project doesn't survive and you
still feel it's valuable for the organization, don't discard it.
It could just be ahead of its time.
Track your costs. Know how much it costs to produce sales
literature, price lists, direct mail pieces, seminar invitations
and other items that are a standard portion of your budget. Then
you can easily map out what you need without a lot of wear and
tear.
In preparing your program and budget, be realistically
optimistic. Your sales department will be called upon to
increase sales, so you should similarly raise your marketing
sights. That usually means more money. Don't be apologetic ...
just specific.
Next, draw up schedules for the publication of ads,
completion dates for articles, completion dates for literature
and mailings and other projects. This provides the skeleton as
well as the flesh for your communications budget.
Don't tie yourself down. It's important that the budget
stay flexible throughout the year because your business isn't
stagnant and predictable for long periods of time. With the
exception of compensating for inflation, don't put contingency
provisions in with your plans. That simply isn't management by
objective. Instead, develop detailed objectives, detailed plans
to achieve those objectives and detailed budgets for these
objectives. Contingencies simply cover up lack of planning.
When you've completed the budget, don't simply drop it in
someone's inbasket. It's too important and deserves face-to-face
presentation. Feel confident with the program. Be so knowledge-
able that you can most effectively present it and defend its
various aspects.
If you've done you homework, that budget is based on
achieving predetermined and preapproved objectives. If manage-
ment lowers the budget, they have to also lower their sights and
decide which of the objectives they want to either lower or drop
altogether.
Even though the program and budget have been approved,
don't think they've been set in concrete. Establish quarterly or
semi-annual budget reviews with your people to help determine if
you are working toward your objectives.
If you're not willing to be measured against objectives,
don't worry about responsibilities and accountability. Instead,
simply ask management how much money they want to spend on
advertising and promotion and fly by the seat of your pants.
If you like danger, it will be a lot of fun.
MANAGEMENT BY OBJECTIVE NOT DOLLARS - To learn more about this author, visit Andy Marken's Website.
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It is important for you to know what you want to happen as a result of meeting with your prospect because everything you say will lead toward that goal and you control the conversation and steer it in the right dire...
