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Allocating Funds For Marketing
It has become essential for
any business in the competitive atmosphere today to devise a sound
marketing strategy. In the absence of an effective marketing plan,
survival of any business is very difficult. That is why to successfully
run a business; you need to learn the art of allocating funds for
marketing wisely so that you can make a balance between the requirements
of the marketing department and your income. You need to allocate the
funds in such a way that the person responsible for marketing can manage
promotional costs, advertising costs, and all other costs that are
related to marketing activities smoothly.
Requirements Vary with
the Different Companies
Allocating funds for
marketing requires that you keep in the mind the cost of the particular
media you wish to use, the cost of gathering important relevant
information, and also the cost of monitoring any changes in the market
trends. You should never underestimate the importance of marketing while
allocating funds for marketing. Understand very clearly that if planned
properly, the amount of money spent on marketing efforts never goes in
vain. Instead, the generation of income increases more than the money
spent. However, the percentage of the revenue a company should allocate
for marketing may vary according to the position of the company. This
percentage may be as high as 25% to 50% in case of startup companies. On
the contrary, established companies do not require allocation of this
magnitude for marketing. Allocating 5 to 15% of the net revenue is
sufficient for these companies.
Different Approaches
There are several different
approaches adopted by the different companies for allocating funds for
marketing. If you are in an industry where it is easy to foretell the
market patterns, then allocating funds as a fixed percentage of revenue
is the best method. By adopting this method, you do not indulge in any
kind of advertising war that can adversely affect your profitability.
However, you need to rethink applying this strategy when your sales
start falling. This is the time when you should allocate more funds for
marketing instead of allocating fewer funds in ratio to declining sales.
According To Competitors
Another approach you can
adopt is that allocating funds for marketing exactly at the level of
your competitors. The people who apply this method believe that spending
on marketing efforts should be according to the market average. The main
drawback of this approach is that you become lazy and start ignoring the
importance of marketing efforts.
Task Approach
An alternative to
allocating funds for marketing is adopting a "task" approach. This means
that you should set your objects according to the task at hand. One more
approach that no expert will ever recommend is the residual approach.
According to this approach, you allocate only those funds that you can
spare after making all other expenses.
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