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Parts of a Strategic Marketing Plan Part 5 – Budgeting by Channel

Next in our Strategic Marketing Plan series, we talk about everyone’s favorite thing: budgeting. 

Crafting an effective marketing mix requires careful consideration of various factors, including the four Ps of marketing: product, place, price, and promotion. Let’s dive into how we can strategize our budget allocation across these channels using a “test and learn” approach.

UNDERSTANDING THE 4 Ps OF MARKETING

Before jumping into budget allocation, it’s essential to understand how the marketing mix aligns with broader business objectives. The 4 Ps of marketing, also known as the marketing mix, are foundational elements that businesses must consider when developing marketing strategies and allocating resources:

  • Product: The product refers to the goods or services offered by our business and includes factors like product features, quality, branding, and differentiation from competitors.
  • Place: Place refers to the distribution channels we use to make the product or service available to our customers. Consider where and how our target audience prefers to purchase our products, such as online stores, retail outlets, or direct sales.
  • Price: Price refers to the monetary value we assign to our products or services. Pricing strategies can be based on several factors, such as production costs, competitor pricing, perceived value, and pricing elasticity.
  • Promotion: Promotion includes all the activities we do to market and sell our products or services. This could include a mix of tactics (advertising, sales or discounts, public relations, and direct marketing) to reach our target customers and drive the outcomes we want.

HOW TO PRIORITIZE THE 4 Ps WHEN BUDGETING

When putting together marketing objectives and budgets, it’s essential to prioritize the 4 Ps based on our business’ goals and target market(s). For example:

  • If our objective is to launch a new product, prioritize product development and promotion strategies that create awareness and generate demand for it.
  • If our objective is to expand into new markets, focus on place strategies like identifying new distribution channels and establishing a presence in them.
  • If our objective is to increase market share, consider pricing strategies and promotional tactics to attract customers and differentiate our offerings from the competition.

By understanding the relationship between the 4 Ps and aligning these with our marketing objectives, we can develop comprehensive strategies that drive business success.

LEVERAGING OWNED, PAID, AND EARNED MEDIA CHANNELS

In the previous article, we touched on the trifecta of marketing: owned, earned, and paid media. Below, we’ll summarize these channels again, as well as highlight the pros and cons of each of them. 

  1. Owned Media: These are channels that the brand controls and operates, such as company websites, social media profiles, blogs, and email newsletters.
    1. Pros: Full control over messaging, branding, and content.
    2. Cons: Limited reach compared to paid media. Requires ongoing investment in content creation and maintenance.
  1. Earned Media: This comprises publicity or exposure gained through word-of-mouth, media coverage, reviews, and social shares. It often results from successful owned and paid media efforts.
    1. Pros: High credibility and authenticity. Cost-effective compared to paid media.
    2. Cons: Limited control over messaging and timing. Relies on audience engagement and third-party endorsement.
  1. Paid Media: This includes channels where the brand pays to display advertising messages, such as search engine marketing (SEM), display ads, social media ads, and influencer partnerships.
    1. Pros: Immediate visibility to targeted audiences. Scalable reach and precise targeting options.
    2. Cons: Requires budget allocation. Over time, messaging will have to be refreshed or audiences may feel fatigue, causing the advertising to become less effective over time. 

IMPLEMENTING A TEST AND LEARN APPROACH TO BUDGET ALLOCATION

Determining the optimal budget mix across owned, paid, and earned media channels requires a data-driven and iterative approach. Here’s a step-by-step approach to implement a test and learn methodology:

  • Set Clear Objectives: Define specific goals for each media channel, whether it’s driving website traffic, generating leads, or increasing brand awareness. Like anything else, channels have strengths and weaknesses too, and some channels are more effective at getting audiences to commit an action (e.g.,  purchase, subscribe, learn more, etc.) or keeping our brand top of mind. 
  • Allocate Budgets Strategically: Start with a baseline budget allocation across owned, paid, and earned media channels based on industry benchmarks and past performance. Adjust budgets based on channel effectiveness and ROI over time. How much time? We need to have enough time for the data to stabilize, so we have accurate learnings. 
  • Experiment with Different Strategies: Test different messaging, creative formats, targeting options, and channel combinations to identify what resonates most with the target customer. Dynamic creative is designed for this very thing, but we can also test elements within our creative. Do images of people or products perform better? Which product photos are more popular? Building a list of questions or hypotheses will help determine possibilities to test what works and what doesn’t. 
  • Measure and Analyze Results: Continuously monitor key performance indicators (KPIs) for each channel, such as click-through rates (CTR), conversion rates, and customer acquisition cost. Use data analytics tools to track attribution and measure ROI accurately. When looking at efficiency, we recommend looking at the “cost per x” where “x” stands for whatever we want customers to do. 
  • Iterate and Optimize: Based on performance insights, reallocate budgets to high-performing channels and tactics while discontinuing or adjusting underperforming ones. Iterate on successful strategies to maximize impact and efficiency. Optimization is very common in marketing and paid media, and should be done regularly and on whatever schedule makes sense for our businesses – quarterly, monthly, or weekly. Never “set it and forget it” when it comes to advertising. Always be learning.

By adopting a test and learn mindset to budget allocation, we can optimize our marketing mix to achieve our objectives.

PUTTING IT ALL TOGETHER

Effective budget allocation across owned, paid, and earned media channels is essential for driving marketing success within the 4 Ps of marketing. Each channel offers unique advantages and challenges, requiring a strategic approach to budget allocation. By implementing a “test and learn” methodology, we can experiment with these different strategies to measure results and optimize performance over time. Ultimately, by continuously refining our marketing mix based on data-driven insights, we can maximize ROI and achieve long-term success in a competitive marketplace.

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