How to measure ROI with a zero-based marketing budget

man thinking in front of boardThe simplest and easiest way to set next year’s marketing budget is to take last year’s budget and simply add the percentage that you want to grow by.  Within 60 seconds your new marketing budget is set, but this doesn’t allow for external market factors like new providers, changing government policies or the needs or wants of customers.

Alternatively, you could adopt a zero-based marketing budget. This will take longer to put together, but it will make you ask the hard questions about the outcomes you want, how much you need to spend to achieve them and the different options available to you

 

Where to start with a zero-based marketing budget

The most daunting thing about having a zero-based marketing budget is staring at a blank white board or empty spreadsheet.  The good news is, if you look at your marketing strategy, you’ve already got a starting point.

If you don’t have a marketing strategy and plan, a good place to start is by reading one of our previous blogs – Planning for future success

In your marketing strategy you would have identified your strengths, weaknesses, opportunities and threats, the market and your marketing funnel.

Use this to start writing down the high-level things you think you need to do to attract new customers and retaining existing ones to either existing or new services.  For example, it may be that your existing customers only use one of your services and don’t know about the other services you offer. It’s always cheaper to cross-sell to an existing customer who knows you than to acquire a new customer.

From here you can list all the communication options that you think you could use to solve that issue.  At this stage the more ideas the better, as there’s no right or wrong answer. You can, and will, logically reduce the list down later.

Once you’ve written everything you can think of, walk away and revisit it the next day. This will give you time to reflect on your ideas and add in any new option(s) you’ve thought of.

 

Reviewing your options

With all your options listed down it may seem like an impossible task to decide which ideas to keep and which ones to delete. By researching the cost and comparing it to the possible result of the activity, you can logically eliminate ideas.

For example:

During the analysis you’ve realised that hardly any existing customers visit your reception, so the cost per result of doing the activity is very high compared to the other options.  Therefore, you’d decide not to do it.

However, the other two ideas come at a relatively low cost compared to the potential gain: a combined cost of $1,800 vs the potential of an additional $100,000 in revenue (20 enquiries at $5,000 potential revenue each), so you decide to add them as lines to your budget.

Measuring the ROI

Not only does this analysis help you decide what activities you should do because you have looked at the potential results, it also allows you to measure the return on your investment. By measuring where your engagement, leads or customers have come from throughout the year or per campaign, you can measure which of your marketing activities were effective.

Here’s the same example but we’re measuring the ROI:

As you can see, the results you expected weren’t the actual outcomes but if it’s your first year of doing this or if there are changes in the market, then your expectations are unlikely to match the results exactly. But what it does do is give you a benchmark for the next year so when you go into the planning phase again, you use the data from this year to refine your predictions for next year, to be more accurate.

 

Benefits of a zero-based marketing budget

Not only does a zero-based budget help you justify your marketing budget recommendations, it also helps you prove the ROI of your investment; something a lot of organisations struggle to articulate.

Whilst you can argue for hours whether to use a first touch or last touch* attribution method to decide where to credit the win, the truth is, unless you have sophisticated systems reporting and analysis, you’ll never know.

A zero-based marketing budget will get you to challenge why you are doing some of the existing marketing activities, and whether they are still worthwhile.

The important thing is by using the zero based budget, you are planning for success and learning to monitor your results which will help you improve your future activities and lead to marketing dashboards that help drive your organisation forward.

 

If you’d like any assistance, please contact us on 1300 763 505 for an obligation free consultation with one of our Business Consultants or book an appointment here.

*First touch – where they first found out about you, the new service etc. OR Last touch – what was the final thing they saw before they acted.

Andrew Ellis

 

Andrew Ellis
Business Consultant
Email: aellis@cbb.com.au
Phone: 1300 763 505