You can't spend it if you don't have it
Published on 07/21/1997 under Budgeting
When you're unsure how much you should pay for something, you usually ask someone who should know and whose opinion you trust. That's the theory behind the study on project costs recently issued by the Business Marketing Association.
By quizzing Certified Business Communicators -- the most experienced and knowledgeable business-to-business marketing communications practitioners -- we can determine some "ball park" measures of what things cost, even though we know there are usually a wide range of variables.
The old pros know a reasonable budget recommendation when they see one; the beginning practitioners do not. And more importantly, with many inexperienced marketing and product managers calling the marcom shots these days, it's important to establish ballpark budgets for typical projects they will encounter.
Five years ago, I teamed with Houston research guru Gabe Gelb to produce the first of these surveys for BMA. Now they have released a follow up study with several new wrinkles, and at least a few surprises.
In our first study, as reported in my May 10, 1993 column, we determined that old yardsticks for video production and brochure page layout were somewhat lacking. The video production yardstick of $1,000 per finished minute was at least 50% below what CBC professionals expected to pay.
The traditional brochure layout and production yardstick of $2,000 per page again turned out to be about 50% too low. The experts in the BMA survey expected to pay closer to $3,000 per page.
Both of these "new" yardsticks are again confirmed in the follow up survey, almost to the penny. Pretty eerie, huh?
Another consistent cost estimate in the two surveys is for logo design. The original estimate average was $7,720 and the follow up survey average was $6,240. If you allow for statistical variation, those numbers are essentially the same.
By the way, the last several times I've quoted $7,500 for a logo design package, the decision to proceed was made instantly and enthusiastically -- by two different small business owners. I guess it's possible they had seen copies of the original BMA study (or maybe it was just stellar salesmanship on my part).
One interesting new tidbit in the new project cost survey has to do with tradeshow costs. Respondents were asked how much they would expect to pay for a national tradeshow exhibit that would help establish their company in a new market, with a 5-year sales goal of $25 million per year. Their estimate was to include booth space, graphics, furnishings, transportation and set-up fees.
The average estimated cost for all regions was $55,068, which was about 44% higher than the original 1992 survey results.
So what can we learn from this? It doesn't tell us what size booth space to reserve or what kind of exhibit to use, or even how much to spend on graphics. But it does say you should plan on spending more than $50,000 at a show where you're an aspiring, new player in an industry from which you want to generate some fairly serious sales revenues within five years.
For inexperienced managers who are trying to keep the bean-counters at bay, this one bit of information might come in handy.
If you're thinking about asking the agency to join you for a 1-day strategy session, you should expect to pay them between $3,000 and $5,000 depending, I suppose, on how many people are involved.
I should note that six survey participants felt agencies should provide this planning service at no charge, which proves that even a small number of Certified Business Communicators can be hopelessly misinformed on certain subjects.
The 1997 survey features one totally new area: electronic marketing communications (internet, intranet, e-mail, etc.). Admittedly, this is new frontier so it should come as no surprise that little, if any, agreement exists among the communications experts.
The survey determined that 67% of participants currently have a budget for electronic communications, and 53% of the remaining third plan to budget for this area next year. And almost all of them use the "task" budgeting method. So far, so good.
The problem begins when you ask "how much" do you expect to spend? Twenty-seven percent said $5-20,000. Twenty-two percent said $20-50,000. Sixteen percent said $50-100,000. And 22% said $100-250,000. That's a pretty big spread.
Obviously, some companies are investing in electronic communications in a significant way, and others are just getting started. And even though it's useless to compare yourself to an average when the numbers are spread so far apart, it probably is helpful for practitioners at the low end of this range to be able to point to the upper end of the scale as where they need to be.
The more we share information like this, the smarter all of us can be. AMA released a study early last year detailing what business-to-business marketers spent on marketing and communications activities in 1994.
The study was done by The Wayman Group, Woodmere, NY, and included some valuable guidelines on how marcom budgets were apportioned (selling expenses vs. advertising, print ads vs. direct mail, etc.). When you combine overview information like this with specific project information from sources like the new BMA study, it's easier to feel confident about investing large sums in marketing communications programs, even if you've never spent that much money before.
I applaud BMA and AMA for releasing this information, and I challenge other industry associations to likewise. The more we know about what things cost, the better we can function as marketing practitioners and strategists.
Because if it's not in the budget, chances are it's not going to get done.