Nuts & Bolts: What to Spend in Marketing
The following is an excerpt of Direct Marketing IQ's recently republished report, "Profiting From the Magic of Marketing Metrics" by Peter Rosenwald.
The annual budget process in most companies is a period of tension and trauma, with the individual trees often getting ignored while management looks at the forest.
Managements tend to focus on the "big" macro numbers: How much you plan to spend for marketing instead of looking at the micro picture; what you can afford to spend (we call this the Allowable Cost Per Order or ACPO) to acquire or keep a customer multiplied by the number you want to acquire or keep. In my view, this is a big mistake: It's the sum of the individual trees that make the forest.
Determining the ACPO is arguably the most important marketing economic input in business today.
... Remember, the marketer's job is to spend as little as possible to achieve as many sales as possible. If each sale costs less than the ACPO, the difference flows directly to your bottom line, and you have a solid argument for getting the budget you need.