Strategizing a Marketing Budget
Allocating resources to best bring in new business
By Bill Neal, CDT
Late summer/early fall is often a busy time for companies, as this is usually when budgets are finalized and put in place for the upcoming fiscal year. Dental laboratories tend to follow a similar financial timeline, determining what needs to be done to close out the fiscal year, as well as financial goals for the upcoming year. Essentially, laboratory owners are determining how much money they will have available to spend.
Businesses of all sizes consider a variety of spending options when finalizing a budget, portioning money for everything from new equipment to employee pay raises to marketing. It is the latter that many dental laboratories leave off the table when planning a budget. In the author’s 22 years of experience working with dental laboratories, it has been a rare occasion indeed that a marketing strategy is in place, let alone a marketing budget.
Regardless of size, it seems that most laboratories do not give serious thought to marketing strategies and budgets. One reason might be that they do not have a dedicated or trained marketing staff in place, or it simply might be too difficult to predict marketing costs for the future year.
In the rare occurrence that a laboratory does have a marketing budget, the amount of gross revenue spent for this purpose could range anywhere from 1% for the average, smaller laboratory, to up to 10% for larger laboratories. These figures, however, do not include sales or marketing related salaries.
So the question becomes: How much should be spent? According Caron Beesley, a Community Moderator for the U.S. Small Business Administration, the range of budget allocations varies from 2-3% all the way up to 20%.1 She also says that businesses with revenues of less than $5 million should allocate 7-8% of those revenues to marketing. A dental laboratory that needs a website and additional materials to begin the branding process will most likely spend at least 10% of their revenues in the first year to get the materials developed. This number will decline in the second year because most of the critical materials have already been developed. Ongoing marketing efforts are essential in the years to come, and the budget could be in the 7-8% range.
The Three Budget Planning Essentials
There are three basic steps to planning a marketing budget—analyzing company financials, establishing marketing tactics, and implementing a plan and analyzing your results.
Analyze Company Financials
Because profitability is vital to the growth of the company, a careful analysis of the company’s financial situation and determination of how much money is available to spend on marketing is critical to any successful marketing effort. Many companies have started marketing projects only to pull the plug when funds run out. This is a waste of marketing dollars, as it takes time and repetition to build brand equity in the marketplace. It is important to make sure that the amount of capital required for marketing efforts is available and laboratories must stay committed to following through with the effort.
Establish Marketing Tactics
Once the budget is established, a laboratory will need to develop a plan and prioritize its marketing strategies. There are many different channels to consider, including print advertisement, direct mail, web-based marketing, trade shows, seminars, and direct sales (see sidebar). Each requires a different budget as well as different types of material support for following up.
During the marketing planning process, it is important to define the collateral materials that will be used to promote the company’s products and services. Some of the material will be used to generate leads and some will be used during sales follow up.
Implement a Plan, Analyze Results
Once marketing efforts begin, it is important to track all of the results and inquiries. This will help define what is working and what might need to be changed. This is essential in the overall budget planning process and will help allocate funds more effectively in the future. Establishing a marketing budget and developing strategies should be done on a yearly basis. If new products or services are added in the middle of the year, revisions to the budget and plan will help the company realize the growth and profit they desire.
References
1. Beesley C. How to Set a Marketing Budget that Fits your Business Goals and Provides a High Return on Investment. SBA.gov. Updated January 9, 2013. Accessed August 14, 2013. https://www.sba.gov/community/blogs/community-blogs/small-business-cents/how-set-marketing-budget-fits-your-business-goa.
Bill Neal, CDT is the founder of AMG Creative, Inc. in Fort Collins, CO.
The Types of Marketing Tactics
Direct Mail Letters—These should be short and to the point. They should include a call-to-action or special offer as an incentive for the recipient to respond.
Postcards—Postcards can work as an effective reminder about services or products. Include a special offer for a limited time and direct respondents to a landing page on a website, which will allow your business to track results and thus help determine the effectiveness of the mailing.
Statement Stuffers—These should be personalized to the laboratory and used primarily to cross-sell or introduce new services to existing customers.
Product Brochures—Specific product or service brochures can be used as leave behind pieces during a sales visit or when mailing a response to an inquiry.
Direct Mail Brochures—Self-mailers with an attached business reply card. These can promote a product and may be part of a program designed to bring in cases, giving the laboratory a shot at developing new business.
Corporate Image Brochure—Stating the capabilities, philosophy, and services of the laboratory, corporate image brochures are used as a response piece to a request for more information about the laboratory. It is possible to use these as a handout at seminars, trade shows, and as a tool during sales calls. In general, the corporate image brochure is the most expensive piece to produce and therefore should not be used in blind mailings to targeted prospects.
