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SMART ANSWERS
By Karen E. Klein
MAY 9, 2000


Budgeting for Growth

Keep short-term goals flexible, and shift resources to match your targets

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Q:  We are a 50-person product-development firm experiencing growing pains. Do you have any information about how growing companies shift marketing strategies? How do we figure out how much to budget for marketing as we get larger?

--L.S., Austin, Tex.

A:  As your company grows, your larger goal may stay the same. But your measurable objectives -- things you want to see the company accomplish within a specific time frame -- will evolve. And your marketing strategies should evolve accordingly. If you don't have a written marketing plan, now is the time to gather key members of your marketing team -- and an outside consultant, if you're not sure what you need to do -- and pull one together. If you have a plan, it's due for an update.

Your plan should include strategies for communication, targeting a market niche, branding, positioning, and pricing. Write it with your long-term goals for the company in mind, says Debbie Morton of Antenna Group Inc., a marketing and public-relations firm based in San Francisco. "Are you more interested in branding or being a low-cost alternative to your closest competitor? Are you targeting a consumer audience? Then you want to put greater emphasis on branding. Are you looking more toward corporate customers? Then you'll need to use a different business-to-business strategy," Morton says.

STANDING OUT. When you first started your company, you may have taken every product-development job that came along because you needed to build a reputation and could not afford to turn away work. Now, you may have built a base of customers in a particular niche that you want to emphasize in the future. If that's the case, think about concentrating your marketing resources in that area.

Also, as your company grows, you probably encounter larger competitors. To shine, upgrade your marketing materials or launch a public-relations campaign to raise your profile, suggests Sharon Berman, president of Berbay Corp., a marketing consultancy based in Tarzana, Calif. You may need to recruit new people to do this.

There's an old rule of thumb that companies should spend 10% of gross revenues on marketing. That's the ideal -- not the reality in many companies, says Meg Goodman, vice-president and group-account director for the Chicago office of Rapp Collins Worldwide. "Budget should be determined by goals, objectives, and past successes and failures." Think about what you want to achieve, how quickly you want to do it, and your other investment priorities. When you launch a new product line or attempt to reach a new group of customers, you'll have to increase the marketing budget.

RESOURCES. Berman suggests that you draw up two spending plans. "Do a conservative one and a higher (but realistic) wish-list budget.... If it's a banner year, you may decide to shift into high gear. Or you may find that one of your tactics is paying off more than another, and you'll shift resources toward that," she says.

If you are willing to pay for some industry figures to use as a benchmark, you can obtain average marketing expenditures for comparable businesses from the following Web sites: Financial Research Associates Inc. (www.frafssb.com), RMA (www.rmahq.org), and Dun & Bradstreet (www.dnb.com). Remember, however, that an industry average may not be suitable for your company because of its stage or priorities.


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