“I know that half my advertising dollars are wasted, but I don’t know which half”
For decades, companies have tried to make their marketing dollars work harder. They have used concepts such as target marketing, niche marketing and positioning to help build sales by generating leads, reaching decision-makers and even asking for the order. But a problem remains: marketing and sales have never been completely coordinated.
The result is that money is allocated to marketing because everyone knows marketing is necessary. And sales people are told go out and sell because most B2B products and services are sold that way.
This approach has worked in the past, but the changing business climate will continue to force companies to re-evaluate the entire process. To borrow a buzz-phrase, tomorrow’s marketing will have to work − not harder − but smarter.
Instead of basing the marketing budget on projected sales, the sales requirements can be used to establish a zero-based approach
In this way, the actual point when the sale is closed determines what materials and how much should be spent to make the direct selling effort as cost-effective as possible.
The first step is to determine the total cost for your entire sales force, and then the average cost-per-call and cost-per-sale. (At this stage, do not factor out individual salespeople). The chart to the left will help you calculate this.
The resulting numbers are a measure of your current marketing efficiency, arid will serve as a gauge of the cost-effectiveness of your total future program.
Next, using the chart below, break out your new accounts and those you have had for at least one re-order. Depending upon market factors, you may also want to break out the accounts by region, season, or some other criterion.
What you are measuring here is the cost-effectiveness of your existing direct-selling effort, looking for the types of accounts which are most profitable and those which are least profitable.
As a general rule, your marketing depends upon the profitability level of each category. Those categories where direct selling is very profitable should have programs designed to support the sales person, helping to either increase the dollar volume per account or lower the average cost-per-sale.
Those categories where the profitability level is low should have programs designed to replace the sales person as much as possible. This can be accomplished effectively with programs such as automated marketing to lower the cost of pre-qualification inquiry fulfillment.
Once you have determined the cost-per-sale for each category, you should establish sales objectives. The first is to maximize a sales person’s productivity and to do that requires establishing the prime job function:
- Developing new business leads
- Making presentations
- Maintaining face-to–face contact at existing accounts
- Trouble-shooting problem accounts
Obviously, some or all of these functions could be present in all categories, but by assigning the sales person a prime function, you are taking the first step in determining:
- The type of program (support vs. replacement) that will result in a lower overall cost-per-sale
- The message that each component in the program should carry
- The amount to be spent to deliver the message(s)
Given this information, you are now in a position to correlate all your marketing, advertising, promotion and direct selling expenses to sales.
Program effectiveness can now be tracked. And you can begin to consider your marketing spend in terms of its contribution to profits…instead of just cost of sales.