I’m sitting in my office cause my board room is being renovated and the other meeting rooms are full of eager sales people and even more eager art directors finding out how to make cute things out of paper. ‘Oh, can we print on this? It’s gorgeous’ I can hear someone virtually screaming with excitement. It’s like I’ve traveled to OZ and the munchkins are discovering food for the first time. Ah, the creative day….
This is all the more ironic because I’m sitting with three over muscled, over dressed under-aged company directors (think 50 cent meets your local nightclub bouncer, with a double degree in I.T.) who have stumbled across some very cool technology and are about to launch it on the unsuspecting Australian public. They are used to getting their way, but only have limited experience with mainstream advertising. They are telling me ‘how it’s going to be’. It’s almost as if we’re being shaken down. Which is being asked for money by a hood with a gun.
They mention a figure for TV. Let’s call it $500,000 for fun. They tell me this is what they are going to spend, and ask me what they can get for it? They expect me to be able to say ‘Two TVCs and 300 x 30 second spots on these shows X, Y and Z’, or similar. This is simply the wrong way around – and almost every amateur does it in Australia. What they should say instead, is that they have a target of X, and ask what will it take to get there?
I tell them they need to spend more money. They react like I’m trying to rip them off. They shuffle in their seats and I can see their knuckles appearing on their fists. If it wasn’t for the fact that there’s girls in the room, and no-body fist fights in front of girls during the day, I’d be really scared.
Does your board get upset when you tell them it won’t work? Or are you like most marketing managers and just humbly accept that you have 4% of some mythical sales figure that you quietly agree to reach and you’ll do the best you can to get there? Are you tough enough to be asking for more yet?
Most of us want more. Some want more muscles, more cars, more friends. More hair – in my case. Most common is more money. With more money, everything becomes easier.
Those idiots who say ‘money can’t buy happiness’ have obviously never been hungry, never had to scrape up the money to pay the rent or never had to give the kids clothes from the op shop cause they couldn’t find the money to visit Target or David Jones.
Is the more thing important with your marketing budgets? How important?
Why do we need more money for marketing? Because it’s not a matter of being greedy. Money for marketing works like fuel in the truck of life. Money drives the marketing machine and the marketing machine drives the rest of the business. ‘Give us more’ should be stamped on our foreheads along with ‘trackable results’ and ‘accountability’. Frankly, why worry about accountability if you’re not going to reward success with more money spent on that campaign?
More ad budgets get more sales, which gets more employment, more director’s bonuses and more shareholder value. Economies of scale (the fact that other inputs cost you less as you sell more widgets) helps real profit leaps become achievable objectives.
Advertising fuels growth like water boosts gardens. You are able to dominate markets, control pricing, dictate to distributors, make huge savings on media and other inputs and maximize the dollars in your care. Pumping bank accounts fuller than a 15 year old’s jockeys on his first date.
In America, UK, Europe, even little ol France, the civilized spend around 10-12% to raise market share. But in Australia we are so much cleverer than that.
We want to only spend 3-5% because we’ll make more profit that way. Because, we are much smarter, some how. The result is we get about half of what we were really hoping for, cause we have collectively managed to get a simple mathematical sum wrong.
Spend 1 dollar. Make 10. Spend 50, make 500. Not difficult. Works every time. The ten for one rule. Write it on the back of the loo in your office. 10 for 1.
If your marketing is very good, your branding, media buying, creative, whatever, you may get to 15 or 20 to one sometimes, even 100 to one is possible, but very rarely.
I’ll translate that into negative accountant talk. 10% works. 5% is possible. 1% is like a miracle. Stick to aiming for 10% and you’ll be a hero when you get to 5%.
I’ll give you a weird, but concrete example of a situation, which may give you an idea of what we ought to do.
Tradies don’t under-quote
If you’re getting the gutters fixed at home, you organize say 3 plumbing quotes.
The first guy turns up and says ‘Mrs. Jones, that’s a big job, the gutters need replacing, so do the down pipes and the whole lot will be about $4,100” You say ‘Christ’, you tell him he’s dreaming and off he goes, disgruntled.
The second plumber turns up, says, “Mrs. Jones, that’s a big job, the gutters need replacing, so do the down pipes and the whole lot will be about $4,600”. You say ‘Jeeesus’, you also tell him he’s dreaming and off he goes too, grumpy you’ve wasted his time as well.
The third plumber turns up, says, “Mrs. Jones, the gutters need replacing, so do the down pipes and the whole lot will be about $5,300”. You say to yourself, may-be the first guy wasn’t so silly after all, where’s his number again?
My point? Accountants have been trying to get us to agree to doing work with too little money for too long in Australia and it’s about time we collectively told them what was more realistic and/or our professional bodies took on that role. I don’t suggest you hold your breath while you wait for them to help.
To say ‘We are aiming at a ten million turnover and you have to achieve that with $500,000 is a joke. It assumes the ten million is there in the first place, ready to be harvested like ripe wheat in the field. The reality is that unless you spend money on very professional marketing, there will be no harvest at all.
We need an industry statement that says 10% is an acceptable/normal amount to spend. Not 5% or 2%. Just 10%. We need to think like tradies and tell the bastards the ugly truth.
When they hunt you down to string you up because they needed a hundred million and you agreed to work with five million (five percent). When your sales haven’t made it and your job’s on the line. When you’re hiding in the toilets hoping the boss has gone home early, you’ll remember the ten for one rule.
We all under budget
Could it be that many of us often oversell the results and undersell the need to fund things? Why does this happen, I hear you think? The reason is simple. When anybody plans anything they never account for what could go wrong. They assume plain sailing. How would you know the helicopter would drop the celebrity on the way to the opening? Or there’ll be a power failure on the refrigerated truck that wipes out all of the frozen packs before they get to Coles main warehouse? Things happen and they often blow out a budget. No-body has campaigns that go smoothly and no-body knows what will go wrong, so things always get under budgeted. Lesson? Always put in a big contingency and if absolutely nothing goes wrong, then throw a massive party with some of the budget you’ve saved. You might get a party every second or third year.
Make the issue a simple one
Most times it’s best, at some stage during the proceedings, to simplify the argument to the core issue of ‘what do we want’? We want 10 x, then we need to spend x. Then you sit down. Next question?
What’s everyone else doing?
According to an article we found the other day, when this was being researched, revenues to advertising work like this, globally:
- Under 5 million 7-8%
- $ 5-10 million 6-7%
- $ 10-50 million 5-6%
- $ 50-100 million 4-5%
- $100 million plus 2-3%
What this means is there is a minimum to do any campaign of about $400,000 and most campaigns peak in OZ at about $3-4 million.
Pharmaceuticals and some retail spend up to 20% on net sales but the overall spend, including little companies, is a staggering 6%. By definition, if you are seeking to do anything better, given everyone is on the same playing field, you need more than 6% to succeed against your competitors. That’s why you should insist on 1 for 10.
How to say we need more
There are so many ways of saying more, an ‘adjustment of forecasts’, a ‘sink’, a ‘set-back’, a ‘timeline change’, ‘cementation of direction’, ‘upping the firepower’, ‘taking an aggressive stance’, ‘checking the spend’, ‘driving in the knife’, ‘taking an opportunity’… Don’t those little phrases give you pictures of situations and even what you were wearing or had for lunch that day? Do you drill down into your experiences? Most of us do all the time. Here’s some of the things I remembered as I drilled down into the issue of raising budgets.
The key approaches
Ambition – ‘This concept is so exciting we’ll need to spend more on it’. This is best done with lots of compliments about the people on the team who came up with the elements, so they all feel a sense of connection/ownership.
Missing Out – ‘Those other bastards are making all this money’ There’s nothing that angers a board/ team more than the idea that other people are getting more share/ making more money. Try it with your kids. Slice off a bigger part of the cake and give it to one of the kids and listen to the other’s scream.
Copying Heroes – “Apple/Kelloggs/Toyota do it this way’ This works best with smaller companies who for some silly reason seem to think that bigger companies know more about what is going on than smaller companies. When you work for bigger companies, you know everyone in them thinks the reverse…big companies need to be told that little groovy companies are doing things this way.
Told You So – “After four quotes, here’s the numbers” Exhausting as it is, some people will only believe it either after you’ve actually done the campaign or when half a dozen consultants have told them so. This is most commonly thrust upon the long suffering public servant marketers and/or marketing people working for a qango/semi government.
I’m The Expert – “This is what it costs. Don’t argue.” This works when you are Eddie MacGwire, John Singleton, Harold Mitchell or Peter Costello. If you are anybody else they think you are trying to steal from them.
The Flip – “Why don’t we just flip a coin? If you win, I do it for 5% and it might fail, if I win, I get 10%, it works and we both get a raise? Works with those who have real balls. But I challenge you to find somebody who’ll do it.
Mathematics – ‘This is how much we need to make this much’. The ten for one rule. I’m pretty sure it will work every time if you show them this article. Try it – I want to get feed-back, please. I’ll shout lunch/drinks (your choice) for anyone who emails me with results – Melbourne/Sydney only – I’m not driving to Darwin to buy somebody lunch.
Sell the money in first
Yes, I know you’re exited about the new layouts and you’ve told your girlfriend all about it and she’s told all her friends and none of them have signed a confidentiality clause, so you need to sell it in today and you’re so excited and you can’t wait to get the boards approval and off you go. But it’s usually best to sell the budgets in BEFORE they see the art work/concept.
The best thing to do is to go see them with an amount you want to raise. ‘This is our target for next year’ would be a good start. You put up $100m on the white board.
“How are we going to make $100m?” What we need to do is very carefully and surgically invest $10m over the course of the year.”
When they say ‘what will we get for $5m? Don’t say $80 million; say $50 million. When they say what about $3 million? Don’t say 40, say $30 million. Don’t budge. Even the dumbest will get the picture after three or four examples.
Don’t undersell the budget
Unless you have a track record a mile long with your team/board, I’d put as much effort into the budget issue as I did into the concept/campaign. Most marketers are under-doing the selling-in task by focusing on detail of execution, media, research results etc. The thing you need to sell is the bigger budget. The details you can go into next time, once they have signed off the money.
Pitfalls when asking for more money
A pitfall is, in graphic terms, falling six feet onto sharpened wooden spikes and lying there for ten minutes as you die. They are unpleasant.
Do not:
- Get nervous
- Hestitate
- Run words into each other like you’re going to vomit
- Agree to what you don’t want to
- Give up
- Be ugly/loud/stupid unless you want to seem it – see tactics
Tactics that work
I love, in descending order:
- The door close – as you walk out, you say, what if I…..
- Only blink when they do
- Copy eyebrows. They raise them, you raise them.
- Two pages, along side each other, with graphs
- Power point – 10 slides only
- Spreadsheets printed huge, spread out on a table
- A five page report
- A 20 page report
I discount, due to the fact that it doesn’t work:
- Begging
- Asking Mum if she can help
- Threatening to kill them/yourself/the cat
- Being unprepared
If you’re going to do the report thing, and look all professional and serious, avoid specifics and go for percentages or totals (depending upon which seems easier to swallow) and use the fewest words you possibly can in explanation. An abbreviation is even better. When is SV a type of a car? Sales Volume? Sick vandalism? Spread variable? You’d have no idea if you were an accountant. And chances are most won’t dare ask for fear of looking stupid.
The locations – pros and cons
Where is a board member most at home? The boardroom. The golf course. His house. Never ask in these places. Try your office, your house or during something he’s very uncomfortable about, like a hang gliding lesson.
When all else fails
Split off items that don’t come into your budget. Sales force remuneration. Promotions at store level. Rebate to retailers. You’ll know what these things could be. Every time you get them put into another budget, yours grows to a more workable size.
How much contingency?
I won’t go near a budget that does not have a decent contingency. I think most of us would be safer if we put in 50% for unknowns. That takes a 5% budget to being 7.5% or even 10%, where we started. Realistically, put down 20% as a minimum for what can go wrong.