Calculating your 2015 marketing budget: How much marketing do you really need?
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Transcript of Calculating your 2015 marketing budget: How much marketing do you really need?
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Calculating Your 2015 Marketing Budget:
How Much Marketing Do You Really Need?
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Not a budget benchmark
webinar“If your business strategy is simply to copy what others do, then by definition the best you can hope for is to be a perfect imitation.”
- Jeffry Pfeffer
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Agenda• How much marketing do I need?
How much should you spend on marketing? How many leads does your sales team need? Calculating cost per lead & establishing a budget
• What levers do you have to drive change• Q&A
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Buyer’s journey (pre-2005)
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Today’s buyer journey
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So how much does all this cost?
Marketing Demand/Lead Generation Jan Feb Mar Q1SEO 7,500 7,500 7,500 22,500 Social Media 6,500 6,500 6,500 19,500 PPC 18,000 18,000 18,000 54,000 Website freelancer - 1,000 1,000 2,000 Hosting 325 325 325 975 Domain Vendor 42 42 42 126 Database Vendor 1,200 1,200 1,200 3,600 Multi-media Contractor 6,500 6,500 6,500 19,500 Freelance designer 500 500 500 1,500 Video/Interactive Development 15,000 - - 15,000 Website Design & Development 10,000 10,000 20,000 40,000 Copywriter freelancer - 200 200 400 Marketing Automation Software 5,200 5,200 5,200 15,600 Stock photos 20 20 20 60 Marketing Hardware 2,900 - - 2,900 Marketing Automation addtl module - 2,400 - 2,400 PR Freelancer 2,500 2,500 2,500 7,500 Wire service fees 300 300 300 900 Total 76,487 62,187 69,787 208,461 = Annualized $976,344
+
*Real example $15M Software company
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But… how much do I need?
Marketing Demand/Lead Generation Jan Feb Mar Q1SEO 7,500 7,500 7,500 22,500 Social Media 6,500 6,500 6,500 19,500 PPC 18,000 18,000 18,000 54,000 Website freelancer - 1,000 1,000 2,000 Hosting 325 325 325 975 Domain Vendor 42 42 42 126 Database Vendor 1,200 1,200 1,200 3,600 Multi-media Contractor 6,500 6,500 6,500 19,500 Freelance designer 500 500 500 1,500 Video/Interactive Development 15,000 - - 15,000 Website Design & Development 10,000 10,000 20,000 40,000 Copywriter freelancer - 200 200 400 Marketing Automation Software 5,200 5,200 5,200 15,600 Stock photos 20 20 20 60 Marketing Hardware 2,900 - - 2,900 Marketing Automation addtl module - 2,400 - 2,400 PR Freelancer 2,500 2,500 2,500 7,500 Wire service fees 300 300 300 900 Total 76,487 62,187 69,787 208,461
= Annualized $976,344
+ ?=
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HOW MUCH SHOULD YOU SPEND ON MARKETING?
How much marketing do I need…
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Isn’t it just all about ROI?
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CAC = Cost to Acquire a Customer
CAC = Total $ marketing & sales expense(n)
Total # new customers acquired(n)
CAC = $119,613
13
Marketing Demand/Lead Generation Jan Feb Mar Q1SEO 7,500 7,500 7,500 22,500 Social Media 6,500 6,500 6,500 19,500 PPC 18,000 18,000 18,000 54,000 Website freelancer - 1,000 1,000 2,000 Hosting 325 325 325 975 Domain Vendor 42 42 42 126 Database Vendor 1,200 1,200 1,200 3,600 Multi-media Contractor 6,500 6,500 6,500 19,500 Freelance designer 500 500 500 1,500 Video/Interactive Development 15,000 - - 15,000 Website Design & Development 10,000 10,000 20,000 40,000 Copywriter freelancer - 200 200 400 Marketing Automation Software 5,200 5,200 5,200 15,600 Stock photos 20 20 20 60 Marketing Hardware 2,900 - - 2,900 Marketing Automation addtl module - 2,400 - 2,400 PR Freelancer 2,500 2,500 2,500 7,500 Wire service fees 300 300 300 900 Total 76,487 62,187 69,787 208,461
+
Jan Acquisition Costs• Marketing = $88,362• 5 Sales FTE = $31,250• Total = $119,612 CAC = $9,201 per customer
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CLV = Customer Lifetime Value
CLV = ARPA(n) (Aver recurring $/Client) * GM%
Churn rate(n)
CLV = $18,342 * 78%
23%
CLV = $62,203
Month
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$0
$15,000
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$60,000
Cumulative Revenue
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Marketing & Sales Efficacy… CAC Ratio
CAC Ratio = CLV
CAC
$62,203
$9,201= 6.76:1 =
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CAC and CLV
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Monthly Expense/Revenue
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Cumulative Expense/Revenue
Axis Title
ExpenseRevenue
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Months to Recover CAC
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-$10,000
$0
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Months to recover CAC = CAC
Average Recurring Revenue per Customer & GM%
9 months to recover customer acquisition
costs
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How much should you spend on marketing?
• CAC Ratio is <1• STOP!!!! Your model is broken and it needs to be fixed before
throwing good money after bad
• CAC Ratio is 1-3• It’s possible you may be in a competitive mature market but,
more likely, you must make some improvements in CAC efficacy and/or your product(s) to improve CLV
• CAC Ratio is >3• Spend as much on customer acquisition as cash flow supports
(keep an eye on months to recover CAC)
• CAC Ratio is >10• Beg, borrow and scrounge for every dollar and invest into
acquiring customers because you are sitting on a goldmine!
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HOW MANY LEADS DOES YOUR SALES TEAM NEED?
How much marketing do I need…
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How many leads do you need?
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Simple Model
Revenue Goal $25,000,000 Existing/Renewal revenue $20,000,000 Incremental new sales required $5,000,000 Average win size $75,000 # of wins needed 66.67 % SQL > Win 25%# SQL's needed 266.67 % SAL > SQL 90%# SAL's needed 296.30 % MQL > SAL 5%# MQL's needed 5,925.93
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Add Nurture & Re-Marketing
Go on to buy 80%
Never buy 20%
% of Leads DQ’d by Sales*
* Source: Sirius Decisions
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Add Nurture & Re-MarketingRevenue Goal $25,000,000 Existing/Renewal revenue $20,000,000 Incremental new sales required $5,000,000 Average win size $75,000 # of wins needed 66.67 % SQL > Win 25%# SQL's needed 266.67 % SAL > SQL 90%# SAL's needed 296.30 % MQL > SAL 5%# MQL's needed 5,925.93 Nurture Impact
# SALs 296.30 # SQLs 266.67 # SALs DQ'd 29.63 % DQ'd that buy 80%# SALs gained 23.70 Sales Gain $400,000
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Factor Conversion Velocity
KPI -3M -2M -1M M1 M2 M3 M4 M5 M6 M7 M8 M9M1
0M1
1M1
2# wins needed 66.7 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 % SQL > Win 25%# Days SQL>Win 45 # SQLs needed 267 22 22 22 22 22 22 22 22 22 22 22 22 % SAL > SQL 90%# Days SAL>SQL 10 # SALs needed 296 74 74 74 74 74 74 74 74 74 74 74 74 % MQL > SAL 8%# Days MQL>SAL 30 # MQLs needed 5,925 494 494 494 494 494 494 494 494 494 494 494 494
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GETTING TO COST PER LEAD?How much marketing do I need…
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Marrying Budget & MQL’s
Marry me?
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Marrying Budget & MQL’s
Funnel Metric # $/## of wins needed 66.67 $9,201# SQL's needed 266.67 $2,300# SAL's needed 296.30 $2,070# MQL's needed 5,925.93 $104
CAC = $9,201 per customer
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Monthly budget & MQL Quota
KPI -3M -2M -1M M1 M2 M3 M4 M5 M6 M7 M8 M9M1
0M1
1M1
2# wins needed 66.7 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 5.6 # SQLs needed 267 22 22 22 22 22 22 22 22 22 22 22 22 # SALs needed 296 74 74 74 74 74 74 74 74 74 74 74 74 # MQLs needed 5,925 494 494 494 494 494 494 494 494 494 494 494 494
(5,925 MQL’s) * ($104/MQL) / (12 months) = $51,376/mo
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Evaluating budget options
PPCAdd Database
Budget $10,000 Budget $10,000
$/Click $5.00 $/record $0.50
# Clicks 2,000 # Lead records 20,000
% Click>MQL 6% % CTR* 1.0%
# MQL 120 # MQL 200
$/MQL $83.33 $/MQL $50.00*single email send
Current budget target = $104/MQL
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Budget levers
(5,925 MQL’s) * ($104/MQL) / (12 months) = $51,376/mo
• Improve the product (Churn, CLV)• Improve funnel conversion rates
(MQL, SAL, SQL)• Lower cost of acquisition (CAC)
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Marketing to Sales handoff is broken
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DIY Sales Engine
This is what Sales Engine Does…
Marketing Demand/Lead Generation Jan Feb Mar Q1SEO 7,500 7,500 7,500 22,500 Social Media 6,500 6,500 6,500 19,500 PPC 18,000 18,000 18,000 54,000 Website freelancer - 1,000 1,000 2,000 Hosting 325 325 325 975 Domain Vendor 42 42 42 126 Database Vendor 1,200 1,200 1,200 3,600 Multi-media Contractor 6,500 6,500 6,500 19,500 Freelance designer 500 500 500 1,500 Video/Interactive Development 15,000 - - 15,000 Website Design & Development 10,000 10,000 20,000 40,000 Copywriter freelancer - 200 200 400 Marketing Automation Software 5,200 5,200 5,200 15,600 Stock photos 20 20 20 60 Marketing Hardware 2,900 - - 2,900 Marketing Automation addtl module - 2,400 - 2,400 PR Freelancer 2,500 2,500 2,500 7,500 Wire service fees 300 300 300 900 Total 76,487 62,187 69,787 208,461
= Annualized $976,344
+
<Marketing Manager FTE
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FREE TOOL and FREE SOFTWARE: How many leads does your sales team
need?
• Understand your CAC, CAC Ratio, CLV and cash needs to achieve
• Use funnel metrics to extrapolate MQL requirements
• Get to cost per lead and evaluate marketing mix alternatives based on cost per lead
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Q&AHow much marketing do I need…