How to Cut Your Budget and Improve Results

by Tom Rankin, APR
President, Thomas Rankin Associates

Here's a MarCom budgeting tip for hard times: cut your ad budget by 20%, and put half of the money into product publicity. The result? You'll save 10% and actually increase the number of inquiries you get. Skeptical? Let's look at some numbers and see how it plays out.

Let's say you are a technical/industrial manufacturer and currently spend $150,000 on advertising. You buy a mix of large and small space, and focus primarily on four key trade publications. Let's further say that your average cost per insertion is $5,000 and that your average ad pulls 30 inquiries (according to Cahners Research, the average inquiry count for a half-page ad is 56). That gives you a total of 30 insertions during the year and a total of 900 inquiries.

Now let's say you cut ad spending by 20%, or $30,000, but keep everything else constant. That leaves you with 24 insertions over the course of the year and generates 720 inquiries. That doesn't sound too bad, unless you are a capital equipment manufacturer and work on an assumed 5% conversion factor. If you are, and your average sale is $400,000, this represents a loss of projected revenue of some $3.6mm. That's kind of an expensive way to save thirty grand. It might even cost a job or two, perhaps even your own.

But don't head for the ledge quite yet. Remember, you didn't just pocket that $30K savings, you reinvested half of it in product publicity (you tricky devil). Let's see how that plays out.

First, some more assumptions, but very conservative ones. If you are an "average" technical/industrial marketer, those four key books in which you place advertising are probably a subset of a much larger list of publications that cover your entire audience. Depending on the number of markets you serve, this list could get quite large. In our experience, 50 is a good average number, but to be very safe, lets say we identify a list of 30 publications that address one or another segment of your markets. Let's further assume that we're going to focus our publicity efforts on product news and that a typical news release, soup to nuts, including photo, costs $1,200. That means we can produce and distribute a good dozen product releases for that $15K, with a couple bucks left over for the Christmas party (yours, not ours: we would never party on the client's dime).

So, over the course of that year, we send out our dozen releases. What can we expect? Certainly, not every book is going to run every release. The more topical the book, the more likely they are to pick up your news, and contrary to what you might have heard, the amount of money you spend on advertising has very (very) little to do with news pick-up, but again being conservative, let's say a third of the books run half of your releases. If you trust me to do the math, that equals a total of 60 hits.

How productive are news release hits? I know of no average numbers for inquiry generation. However, in most cases, news releases out-pull ads. But we're being conservative, so let's say the releases pull with the same frequency as ads, or about 30 inquiries each. That's 1,800 inquiries or--brace yourself--TWICE THE NUMBER OF INQUIRIES YOUR ENTIRE FULL-BUDGET AD PROGRAM WAS PULLING!

But hold on. Let's not get carried away. There must be a catch, right? Well, no, there isn't. But for the skeptics out there who claim that inquiries from new product announcements are less qualified than those from ads (they are not), let's say that half these people are just literature collectors. That still leaves you with a combined ad/PR inquiry total of 1620, or an overall 55% increase in inquiry generation. You still saved 10% of your original budget, and if that 5% conversion factor still holds, you could be looking at a very nice bonus. Maybe even a promotion. But let's not get carried away.

OK, OK, you say, very nice numbers, but is this real? Can this really happen? In a word, yes. Granted, this scenario is not based on hard-nosed, empirical research, but without a doubt, PR or product publicity has proven itself to be a very credible and highly cost-effective means of product promotion (and that's not all it can do). It does not take the place of advertising, we can't control timing, content or impact, but in terms of raw bang for your buck, nine out of ten times it will beat straight advertising hands down.

And if you don't believe me, we'll be happy to prove it.

©2004 Thomas Rankin Associates

MarCom in Hard Times:
How to Cut Your Budget and Improve Results

Why a Marketing Communications Firm?
Putting Things in Perspective.

Turning Vision Into Reality:
A Primer on Strategic Planning.

Photos, Photos, Who Owns the Photos?

Press Kits: What, When, Where and How

Getting Your Message to the Right People, at the Right Time

Recent Articles by Tom Rankin

  What Does It Cost?:
How to Make an Apples to Apples Comparison of PR and MarCom Services.

Ten Ways to Make News
(and help sell your products).

PR and Propaganda: on the Ethics of Truth

Zen and the Art of PR:
Image Building as a Self-Fulfilling Prophecy.

Marketing PR in the Life Sciences:
A Primer


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