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April 14, 2006
Marketing Investment Allocation -- What’s Your Risk Profile?
by Sridhar Ramanathan
My wife and I recently hired a certified financial planner to help us with our personal finances. Like many MBAs, I tend to focus more on making money than on managing it smartly. We learned that proper allocation of investments across stocks, bonds, mutual funds, and cash will yield better returns than the S& P 500 index or playing the market over the long term. The key is getting the right allocation in place and making minor tweaks perhaps quarterly and not on a reactive, daily basis. I believe the same approach can be applied to marketing investment to produce better long term results. How? Let’s look at a couple extremes.
We’ve all heard of examples of dot com companies that shot their wad of millions on a Super Bowl ad. Then they were left short on funds to continue developing the brand, creating demand, and supporting the sales process. Pets.com comes to mind as an example. In finance terms, this is an “aggressive” risk profile, someone who’s willing to make speculative bets with the hope of making huge returns. Perhaps the allocation was 90% brand building, 5% demand generation, and 5% sales enablement.
The other extreme is the high tech company that invests across multiple buckets—branding, demand generation, and sales enablement. Examples might be IBM and Apple. They might be viewed as a “conservative” risk profile because they’re spreading their marketing bets more widely and sustaining investments for the long haul. The typical allocation might be 40% brand building, 35% demand generation, and 25% sales enablement.
Only you can decide what the right allocation of marketing investments is for your business. And naturally it depends completely on your objectives, time horizon, and risk profile. Here’s a quick summary of what I have found to be good marketing investment vehicles in the three categories of marketing spend. For each bucket, I have prioritized marketing tactics in terms of highest bang for the buck (highest risk adjusted ROI) down to the least.
Demand Generation
- Search engine optimization
- Pay per click advertising
- Whitepaper/content syndication
- Customer seminars
- Promotions
- Email marketing
- Webcasts/podcasts
- Trade show
Brand building
- PR (media, analyst, public relations)
- Print advertising
- Online banner advertising
- Web blogs
- Billboard advertising
- TV/Radio advertising
Sales enablement
- Website
- Customer case studies/references
- Competitive tools
- ROI calculator
- Marcom collateral
In conclusion, I strongly recommend that you seek outside counsel to crystallize your objectives, quantify your goals, and map out the right allocation of marketing investments. Then bring this person (a veritable “certified marketing planner”) back quarterly to see what tactical adjustments are warranted based on actual performance.
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Posted April 14, 2006 | Permalink
Posted to Marketing Management