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The endless question of cost and budget for marketing

During my experience as a marketer, the question “What budget would you take for a marketing service?” has often come up. The question, seemingly insignificant, is, in fact, more tricky than it seems. The client asked me to commit to a fixed price before any serious talk about his project. And, whether or not he had set a budget, he probably had a rough idea of how much he was willing to pay for my work. Is it a fool’s game in which the first one who gives his price loses? What if that wasn’t the main thing? How do you manage in these circumstances to waste no one’s time? That’s what I’m going to show you now…

“I’ll tell you mine if you tell me yours”

As a contractor, you should be prepared for all situations. You will meet customers who have thought about their budget before their request. Others will prefer to elaborate it with you directly. While this may theoretically create a boulevard of opportunities, it can also turn into a fool’s game. On one side, you have an average daily rate in line with your expertise and want to be benchmarked on the value you can bring to the project. On the other side, your customer might be ready (or not) to put the price for your expertise but doesn’t want to announce his budget too early.

It will often be very difficult to get out of this situation without giving up a single figure. One may wish that the customer does not base his choice solely on this, as it does not determine the extent of the work provided and what results to expect. Nor does it take into consideration possible additional costs such as advertising, and possible unforeseen cost overruns. Which leads me to this: non-agile billing methods are, in many cases, not very suitable for marketing services. And it is taking an unnecessary risk to define the budget to the penny before the project begins. Unless you start with something that leaves a very comfortable margin, it doesn’t bode well for the future.

So, if that’s not the right approach, what is? Can you think of ways to save time for everyone and give full consideration to the projects that deserve it?

Marketing investments: what the figures say

Any consultant will tell you the cost of a project is based on 3 key elements: The level of employment, the duration of the project, and the expertise mobilized around it. The cost of a marketing project should also take into account the human and material resources available and the advertising budget for each channel.

In all successful companies, the marketing budget takes a significant share of their revenue. Gartner’s 2019-2020 CMO Spend Survey found that marketing budgets actually averaged about 11% of their revenue. Social media spending represents 12% of the marketing budget, and it is expected to top 22.5% in the next 5 years, according to Deloitte’s most recent CMO Survey. On average, businesses that outsource their social media marketing spend about $200-$350 a day. That’s between $4000 and $7000 per month, $48,000-$84,000 per year.

These figures are averages for all companies regardless of the industry. Already successful businesses have customers, brand awareness. They will focus their efforts on new product launches, commercial events. They can stick to a budget close to 10% or increase it up to 20% if they’re in a competitive industry. For startups, it can be even more. They can only generate income when people know what they are doing, what their products are. And they can’t introduce their products to potential customers at scale without spending lots of money.

From my experience, spending less than 10% of your revenue, or less than 11% of your budget on marketing is a strategic mistake.

Quickly identify the client’s needs

When a client does not yet have a clear idea of his objectives, the skills he is looking for, and the project deadline, it is too early to make a proposal. If what the client is looking for is simply an exchange of ideas, it’s up to you to see if you’re willing to help.

To assess the client’s project as precisely as possible, and quickly determine what value you can add to it, ask the following questions during your interviews: What are the objectives to be reached? What size is the company? What level of expertise is expected? At what stage is the project? What help is needed? Strategic input, complete ownership? What monthly budget could be spent? When would the project start?

Breaking the Budget Deadlock with Performance-Based Pricing

Many marketing consultants are literally prisoners of the budget issue, just as clients are. The reality is that with experience, a consultant knows what impact successful viral and paid campaigns can have on their clients’ OKRs. What impact these results can have on their clients’ revenues, in their industry. They use to measure it all the time. So, what if this performance could reward the consultant for the part he is managing directly? Then it is just about agreeing on the KPIs and OKRs used to highlight his added value.

Businesses that truly understand marketing not only think budget in terms of a minimum amount they are willing to spend. They scale it up based on the results they achieve, as long as it matches their efficiency ratio. If they are not yet profitable, they do so based on their expected revenues. The remuneration of the service provider indexed to reliable criteria thus leads to an increase in its value. The client’s profit margins are directly reinvested in marketing, creating a virtuous circle of growth.

I believe all the more in this model that, as a freelance consultant, this is the only way I work, and as a start-up entrepreneur, this is how I will operate with most of my contractors. For consultants, it is a model with a bright future. Agencies or freelancers who have opted for it have doubled, tripled, or even quintupled their income in a few years. It allows the client-contractor relationship to become a true partnership, with everyone looking in the same direction.

By Max Schleiffer

French entrepreneur. I have grown a marketing consultancy over the decade. Now, I explore new ways of working in the digital age.