Where Should Building Product Manufacturers Invest Their Budget Dollars

Posted On: 
Jun 7, 2017
Where Should Building Product Manufacturers Invest Their Budget Dollars

“Good companies are thoughtful and discriminating as to how they allocate time, people, and money,” says author Jeffery Fox in his book How to Be A Fierce Competitor. Fox advocates that companies should invest their money where they get the highest return. Invest your budget dollars in projects that generate a good return. Invest your time with people who are winners. How much money should you allocate to marketing? And how can you spend it wisely?

How to Calculate Your Marketing Budget

According to the U.S. Small Business Administration, many businesses allocate a percentage of actual or projected gross revenues – usually between 2-3 percent for run-rate marketing and up to 3-5 percent for start-up marketing. Several factors can affect budgeting including: industry, size of business, and the growth stage. As a general rule, building product manufacturers with revenues less than $5 million should allocate 7-8 percent of their revenues to marketing. The allocated budget should be split between brand awareness (website, AIA course, marketing collateral, etc) and the costs of promoting your business (campaigns, advertising, events, etc.).

How Do You Spend Your Marketing Dollars?

Knowing how much you have to spend on marketing is critical; even more critical is how you spend it. Author Fox notes companies “should pour the coals into growth opportunities. You should over invest in business and products and brands and people that have big potential. Cutting the funding for activities that fuel sales growth and fuels innovation slows growth, dulls innovation, retards market share penetration, and provides catch-up time for competitors.”

Building product manufacturer’s marketing budgets should be a component of their marketing plan, outlining the costs of achieving marketing goals within a certain timeframe. Marketing plans and budgets should be flexible. There may be times when you need to throw in another unplanned campaign or event. Manufacturers need a plan in place for measuring spending and the impact that activities have on their bottom line. You need metrics! You can’t justify the costs of marketing programs without hard data to back up your decisions. Invest in programs with the highest returns based on metrics.

Pay for Performance, Not For Activities

“Performance is outcomes, not the activities that cause the outcomes. Hours open, sales calls made, miles flown, time invested, seminars given, products sampled, are not outcomes. They are business-getting activities, actions, tactics, etc. If an activity is linked to improving the competitiveness and economics of a company, then it should be emphasized, enhanced, scrutinized, and measured. But don’t pay for activity. Don’t pay a house painter $50 an hour to paint a house. Pay for the painted house,” says Fox.

Several building product manufacturers make critical mistakes in this area. How many managers do you know that spend time with poorly performing product reps and problem employees? They try to save a sinking ship with a million holes. Instead, these managers should be spending money and time with the superstar product reps of the company. How many product manufacturers squander their marketing dollars on useless magazine ads? Let’s explore some winners and losers regarding marketing programs using the criteria that Fox advocates.

Where Should Building Product Manufacturers Invest Their Budget Dollars

Magazine Ads Are Worthless

For decades, newspapers, magazine ads, and direct mail were utilized by many building product manufacturers to reach architects, spec writers, engineers, and other design professionals. Today’s media world is very different. Total print advertising in the United States dropped by over $30 billion between 2011 and 2016. Online ad spending reached $62 billion in 2016. If your company is spending budget dollars on print advertising to reach the decision makers, you are wasting precious marketing dollars on a program with almost no way to determine ROI.

In a previous blog, we discussed how magazine articles are a complete waste of marketing dollars. I once heard a CEO claim he wanted to flog his national sales manager after finding out he had spent $5000 on a full-page ad in a fancy magazine. There are very few methods to determine ROI for magazine ads and most of them offer unsatisfactory outcomes. Design professionals are supposed to read the magazine, find products of interest, and fill out the accompanying paper card to receive their free product information. How many architects do you know that still mail in paper product information requests so they can wait eagerly by the mailbox to receive this tantalizing information?

Not All Trade Shows Are Created Equal

Trade shows can be very expensive for a building product manufacturer to exhibit at. In fact, trade shows can devour a marketing budget quicker than a cannibal at a Mongolian BBQ joint. Trade show expenses can include the exhibition booth space, the creation of the booth itself, travel expenses (airfare, hotel, meals), and any marketing collateral and swag that needs to be developed. The benefits of a good trade show include: face to face time with architects and spec writers, lead generation, networking opportunities, learning about your competition, and staying on top of trends in your industry.

However, selecting the wrong trade show to attend can be a disaster. Many manufacturers have probably attended a trade show with poor attendance. There are more crickets chirping in the aisles than architects visiting booths. Even large national trade shows like the AIA Convention and USGBC GreenBuild show can differ in attendance based on the location of the event and time of year. Sometimes regional trade shows can be the real winners when determining how to spend marketing dollars. For example, The Texas Society of Architects Annual Convention is often larger and more productive for manufacturers than other national trade shows. Not all trade shows are equal, be careful in selecting the best one based on ROI.

AIA Continuing Education Programs: Winners and Losers

AIA continuing education is one of the most effective ways to reach architects, spec writers, and decision makers. However, not all AIA and USGBC education courses are created equal. There are metrics and outcomes to review to determine the most effective continuing education courses. For a start, online AIA courses should provide building product manufacturers with participation data. Who took the AIA course, passed the quiz, and received AIA credit? Course participation reports provide hard data to judge the effectiveness of the program.

In addition, the delivery format can have a major effect on ROI. As we discussed in a a previous blog, using the PDF format as the primary format for your online AIA course is a very bad idea. Architects typically have to download the PDF course and read the document like a newspaper article. This is a very antiquated format considering an online course in 2017 should include media like video, animation, and audio narration. A PDF is one step up from a JPEG image. Interactivity and creativity is limited for PDFs which mean there are less tools to use to educate architects about your products. This is bad for your brand and a poor investment. Surprisingly, AIA education provider AEC Daily uses this outdated delivery format as their primary education tool to educate architects.

One of the most effective marketing methods for building product manufacturers are AIA webinars. How many programs do you know of where you can educate 250-300 design professional in one hour without paying for catering, airfare, hotel fees, rental car fees, venue rental, and other costs? Webinars that are registered for AIA, GBCI, and IDCEC hours provide a significant avenue for manufacturers to reach the top decision makers. Your investment can be evaluated on several levels. Webinars can produce a participation report, a customer survey about your products, and the opportunity for architects to ask questions and offer feedback via a form. Manufacturers can track the costs, results, and calculate payback from a webinar event. This is nearly impossible with magazine advertisements.

For AIA online courses, a capable Content Management System (CMS) should be able to provide participation reports. If a product manufacturer does not have the resources to buy an off the shelf CMS or money to custom design one to fit their needs, there are AIA Education Providers who can provide these services. For AIA online courses, a Content Management System (CMS) should be able to provide participation reports for all design professionals taking the course. This information is crucial to determine ROI.

Evaluating Marketing Campaigns

Metrics, new customers, achieved goals, sales opportunities, increased revenue, and the number and value of leads generated can all be used to evaluate marketing campaigns. Building product manufacturers don’t have unlimited budgets. They need to justify their budgeting decisions based on ROI. Product manufacturers need to make big decisions with demostrable outcomes. Analysis of facts, metrics, and data should provide the necessary information to evaluate whether a marketing campaign is a success or failure. How does your company evaluate the success of your marketing programs? What metrics do you use to determine success or failure?

For more information or to discuss the topic of this blog, please contact Brad Blank