|
 |
Knowbits 
February 2004
Outsourcing for Productivity
Marketing intelligence you can use for your business.
We gather industry updates, tips and information that we think our clients
can use to develop stronger marketing efforts. Each topic is posted here first, sent via email and then archived.
To receive the email version of Knowbits, please complete the contact form.
Outsourcing for Productivity
Or, how much should you budget for marketing?
First, a pop quiz
Salesforce.com, a hot San Francisco-based software
startup, revealed in their December IPO that they spend $33 million a year
on marketing and sales. What percentage of their total revenue does that represent?
A. 07%
B. 22%
C. 40%
D. 65%
This example, from a Fortune magazine sidebar January 12th
about marketing budgets, is perhaps an extreme one. The company is legendary for their
extreme use of promotional pieces. Still, how much could they possibly spend on all that "stuff"?
The answer is "D", an astounding 65%. Of course, Salesforce.com is a sales-focused company,
out to dominate their space. For comparison, the 22% figure is Oracle's budget, while Microsoft
spends a mere 18% - though from the biggest revenue bucket of them all.
The formula?
There is no "magic number". Marketing budgets, like all company expenditures, should be set with
business goals in mind. And that doesn't mean "whatever's left over". If you are a start-up with no brand equity
and new products or services to introduce, you'll likely need to spend a greater amount upfront to get noticed.
If you're trying to gain or regain market share in a crowded field - again, it will likely cost you more to
keep your name top-of-mind in your segment. Retail spends more because consumers are fickle. But most mature
business services companies plan on spending about 5-10% of revenue to grow their businesses steadily.
A little (easy) math
Let's do some quick math starting with a nice, even annual revenue of $1 million.
Your marketing budget at 07% is $70k, or roughly $5,800 per month. If you needed to pay a full-time Marketing Director,
well, you couldn't. But maybe a Marketing Manager - and that would be it. No money left for tactical execution.
You could increase your budget to 10%, and have $2500 per month left for creating things. That's not much either.
Or: you could outsource your marketing, and for $100k, you could get a pretty effective (and well-executed)
integrated marketing plan.
It's grotesque!
It's really a question of labor productivity. What does this have to do with marketing? To quote a real guru, Peter Drucker.
"Nobody has really looked at productivity in white-collar work in a scientific way. But whenever we do look at it,
it is grotesquely unproductive…In part this is because knowledge work by definition is highly specialized, and that means
that the utilization of the knowledge worker tends to be very low." (Fortune, January 12, 2004, p.117)
Translation: If every company, no matter what the size, wanted to have an
effective in-house marketing department, they would need to hire a large
number of specialists:
- Director or VP of Marketing
- Marketing Manager/s
- Researcher/s
- Creative Director
- Graphic designers (for print and online)
- Writer/s
- Web developer/s
- Events staff
- Public relations staff
- Lead generation staff
- Database manager for the CRM
It's an expensive proposition. And in many companies, most of these people would have nothing to do most of the time,
because marketing activities tend to employ different skills in spurts. That's why it makes more sense - and increases
productivity - to outsource things like advertising, PR and marketing. An economist would say you can achieve near-100%
utilization of specialized employees by paying them only when you need them.
Another free tip
While lots of tools are now available for "do it yourself"
marketing, if you're serious about your business, you'll just be misusing
your own time - and that can be very costly. It would be like me following
a Do-It-Yourself-Guide for installing a new shower. I could probably do it,
using lots of swear words, but in the end I suspect that I and the whole house
would be all wet.
|
|
Knowbits Archive
|
