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The Perfect Marketing Budget

  |  August 1, 2001   |  Comments

In today's economic reality, you need every project to pay off quickly. You can't afford to take a flier on a long-term investment, where the term may exceed your job expectancy or even your company's life expectancy.

    "Caviar or truffles at the launch party? What the heck, we'll take both!"
    --Any dot-com VP of Marketing, circa March 2000
Want the perfect marketing budget? Just use my patented system: Give every program a $1 budget.

You may think I'm joking, but I'm not. Before you dial the local asylum to cart me away, hear me out.

In today's economic reality, you need every project to pay off quickly. You can't afford to take a flier on a long-term investment, where the term may exceed your job expectancy or even your company's life expectancy.

I'm not saying that you can turn a new product line into a million-dollar seller without spending money -- you can't. What I am saying, however, is that you need to make sure that any money that you do spend results in a pretty darn quick payback.

It's simple math. If you spend $1 on marketing, your investment pays off with the first sale. If you spend $100,000,000 to market Miss Boo, your investment will pay off around the same time that Beelzebub starts turning triple axels and salchows.

Keep your budgets low, and you can afford to make mistakes. The simple fact is that not every marketing campaign is going to work. I think it was Newton's Fourth Law. Or perhaps it was the Fourth Law of Apple's Newton. If you haven't got the clairvoyant powers of a Miss Cleo, or at least Dionne Warwick's Psychic Friends Network, you're going to need to try a few different things before you succeed.

A classic example of successfully using the $1 budget technique is 3M's approach to innovation. 3M allows its researchers a certain latitude to pursue untried, unplanned, unbudgeted ideas. It's not easy; but if you can beg, borrow, or steal the resources, 3M will look the other way. In fact, this approach has resulted in some of 3M's greatest products, such as Scotchgard and the Post-it Notes.

Constraints breed creativity. If marketers know that they can't launch a campaign unless it a) costs nothing, or b) has a payback period of one month, they will get very creative.

Yes, it's easier to call up the agency and have them whip together creative and recommend some media buys, but without constraints we wouldn't have success stories such as the original Blair Witch Project (and if that isn't an example of marketing successfully making something out of nothing, I don't know what is!).

Closer to home, I tried a variety of different marketing approaches when it came to launching our newest product, The Lead Engine. I gave half the team a healthy budget for traditional marketing, and I gave the other half the task of coming up with great campaigns that wouldn't cost us a buck.

The traditional team did a great job of planning out an opt-in email campaign that ran to our target audience. The $1 team uncovered barter opportunities, undiscovered advertisers, and obscure but scrappy distribution partners. Though both teams were successful, the $1 team produced double the revenue and customers at basically zero cash cost!

Guess which marketers are getting the next big assignment?

There are times when spending money is unavoidable and it's better to be pound-wise and penny-foolish. Even so, you should strive for frugality. Regardless of the budget, a disciplined marketer always acts like the cost of the campaign is coming out of her own pocket -- and that gives her campaigns a better chance of success.

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ABOUT THE AUTHOR

Chris Yeh Chris Yeh is a partner at Porthos Consulting, a sales and marketing consultancy that focuses on delivering measurable results in lead generation and telesales. Prior to joining Porthos Consulting, Chris helped start companies like TargetFirst, United Online Services, and Merrill Lynch's Intelligent Technologies Group.

Chris and his work have been featured in Fortune, the Financial Times, and the New York Times. He earned his MBA from Harvard Business School.

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