Calculating your 2015 marketing budget: How much marketing do you really need?

Calculating Your 2015 Marketing Budget:

How Much Marketing Do You Really Need?

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

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

Buyer’s journey (pre-2005)

Today’s buyer journey

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

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

+ ?=

HOW MUCH SHOULD YOU SPEND ON MARKETING?

How much marketing do I need…

Isn’t it just all about ROI?

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

CLV = Customer Lifetime Value

CLV = ARPA(n) (Aver recurring $/Client) * GM%

Churn rate(n)

CLV = $18,342 * 78%

23%

CLV = $62,203

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Cumulative Revenue

Marketing & Sales Efficacy… CAC Ratio

CAC Ratio = CLV

CAC

$62,203

$9,201= 6.76:1 =

CAC and CLV

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Axis Title

ExpenseRevenue

Months to Recover CAC

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Months to recover CAC = CAC

Average Recurring Revenue per Customer & GM%

9 months to recover customer acquisition

costs

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!

HOW MANY LEADS DOES YOUR SALES TEAM NEED?

How much marketing do I need…

How many leads do you need?

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

Add Nurture & Re-Marketing

Go on to buy 80%

Never buy 20%

% of Leads DQ’d by Sales*

* Source: Sirius Decisions

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

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      

GETTING TO COST PER LEAD?How much marketing do I need…

Marrying Budget & MQL’s

Marry me?

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

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

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

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)

Marketing to Sales handoff is broken

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

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

Q&AHow much marketing do I need…