How much should a creative project cost? What should I spend on a new website? What’s the average cost for a mobile app? How much should I put in my budget for PR? Can I get a new brand for less than 10K?
Setting a budget for a marketing project always seems to be a dark art. Let’s see how budgets start, what happens in the middle and how a creative project can be delivered on the cost basis that you’re looking for.
First of all, except in the most agile and lean of startups, there’s normally a major cross-management exercise that creates ‘the marketing budget’.
In most cases it equates to a percentage of last year’s, or this year’s predicted, revenues. What that percentage is can vary from 1 – 20%. It’s driven by, and drives, the cost per acquisition for a new lead or customer. If your targets are for 1,000 new customers, your budget is designed to cover the known acquisition costs of each of these. It’s why companies tend to put a higher percentage into marketing at an earlier stage. As the business grows, the cpa reduces and so does the overall percentage dedicated to marketing.
So that’s the broad number. Next you have to allocate this and then work out how it translates into project and campaign-specific budgets.
Let’s take a simple example. You have a million dollar marketing budget. You have responsibility for a product launch which will include branding and promotion. In fact, the annual product launch takes up the biggest chunk of your budget. Then for your existing products you want Advertising; DM; PPC campaigns; PR and tradeshow attendance.
At this point marketing folk start doing the bottom-up approach and hope the top-down total meets this in the middle.
Let’s take DM as an example. You want to email your customers each week with news and offers, knowing that this could increase sales to the targets outlined in the budget. You add in your email package costs, your database cleaning costs, and any specific offers that go with this – the cost of the free hotel stay, the iPad competition etc. You extrapolate by the number of weeks, add in a magic number for luck (or what we officially call contingency) and you have an amount in your DM accounting line. Let’s say it’s 100K.
So far so good.
Let’s look at the slightly more complicated item. The new product launch. We know that there are all sorts of elements that contribute towards this. It could be packaging in the consumer space, it could be user documentation in the b2b space. It will probably start with the new look and feel – the brand identity elements and then all the components needed to get it out there.
Now the traditional way to work out the pricing – the budget – for this was, well let’s be truthful, get someone else to work it out for you. Given the ‘broad allocation’ we started with, this has whittled down to 250K.
So you go to your agency of choice with that 250K and ask them to create the launch package. You’ll see concepts, you’ll see estimates, you’ll see the ‘big crazy idea’ of giving your cheese square a new name and sending it round a marathon course, and then you’ll see some very tangible deliverables. But you’ll have started off expecting to write a PO for 250K to cover it all and get the product out of the door.
Which means, that rather like David Cameron not knowing the price of a pint of milk, marketers often don’t really know how much something costs.
So to actually ‘price’ those elements is quite difficult.
Which, if you’re willing to just hand over the ‘top-down’ budget from the start is fine. But what happens when you need to tell a supplier how much they have to spend. Let’s revisit our product launch. We’d really like a mobile app to show it off. Because it was part of the ‘big project’, it’s never been considered on its own, but it can’t be sourced through the ‘big project provider’. Or we’ve been told that if we want this we’re going to have to increase our budget by an amount that even the most generous CFO won’t sanction.
So what should this element cost? You know roughly how much budget you have left to spend. Cross-check this by how much you expect it to deliver.
Is it going to generate new customers? If so what’s the likely return. You only have 20K from your allocation, but you think the app will generate incremental revenues of 100K. Whereas the banner ad campaigns you’ve booked have 30K assigned but will only generate incremental revenues of 80K. Perhaps you should look at some re-allocation – or question whether you’re getting best value on those other elements.
At the Creative Services Exchange we’re often asked the ‘how much’ question. But really there is no final answer. It will always be a part of that allocation. On the Exchange the job of the creative is to deliver work that is right for your budget. If after all the machinations you only have 4K for a website, then this is your budget. It doesn’t matter if the last ten website projects we ran were for 15K: somehow you have to make that 4K deliver. You know that 4K isn’t going to deliver the same as 20K in just the same way you know you’re not going to get a Bentley for the cost of a Skoda. Budgets always need a sense of perspective and realism.
However if you only have 4K but know that this is the most critical thing you’ll be buying this year and you know that the returns will be considerable – then is it worth making that shift upwards. Similarly if you’ve over-allocated – think about what that spend could deliver you in terms of other projects.
This simple approach of pricing based on expectation will help you start to budget at more of a project level and the days of handing over an almost blank cheque will be past. To give you that wiggle room the brief app lets you specify a budget range: this means that you can think through and also that creatives can show options within that range.
Finally, taking this project approach to the Creative Services Exchange consistently delivers savings of 25-50%. This means that your 4K project becomes in excess of a 5K project in value. Those remaining budgets could actually deliver more projects and the projects you thought were impossible become eminently deliverable. And if you still want inspiration – look at blur Trading to see the current projects and their values.
Brief your project now!