Ray worked with B-2-B and Consumer clients throughout the world ... including USA, Canada, Mexico, Asia, the South Pacific, Europe, the Middle-East, Central & South America, Africa.

This website is a compilation of Ray's 10 years on the Web.


Power Direct Marketing: The Book

Three Styles of Budgeting

Here are three specific ways to set your direct response budget. Three methods for you to consider as you establish a budget.

I. The sales turnover approach

It is traditional to take a flat percent of sales and appropriate this sum as the budget. This is common where the product is established and the market is clearly identifiable. Usually the amount is fixed against last year’s actual sales. Or sometimes it will be based on next year’s projections. Many consumer marketers use this approach—fewer in the business-to-business field.

II. The share of marketing expense method

In many large organizations each share, each individual part of the total program, is isolated and a marketing communications budget is set for that specific tool.

You look at all of the planned activities, including direct marketing, general advertising, sales promotion, public relations, and the pieces of each, and allocate a fixed budget for each. According to how you see that function working as part of the whole. Divide the total pie by what you believe to be the best mix, to bring you the maximum results for your investment.

This is a very subjective approach with a lot of feeling and emotion entering into the process. This is not to say it is not a valid method of budget setting—it is. Companies which assign a large dollar amount to marketing and advertising activities many times find this a good way of setting their budget.

III. The task method

Under the task method you assign what you feel is necessary to achieve your specific objectives. You look at your goals, you evaluate the marketing tools and expenses you deem necessary to achieve those goals, and from that planning effort create a budget. You’ve established a budget to accomplish the task.

This is very common among direct marketers. Many direct marketing projects are just that—projects—and thus only the task method is truly workable.

The task method is also popular with industrial firms. It applies equally well when new products or services are being launched, business or consumer.

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