Marketing Budget Allocation - Make Money

As per the last two posts (The Value of a New Customer and Marketing Budget 101) I talked about one way of determining your marketing/sales budget.

If you want a simpler method, allocate a percentage of total revenue.

Now the question is where to spend your money for maximum effect.

There are basically four sources of future sales:

  • Existing customers,
  • Referrals (word of mouth),
  • Prospecting, cold calling and networking, and
  • New leads from marketing.

You will want to allocate funding (or effort) to all areas.

Existing Customers and Clients

Everyone talks about existing customers being extremely valuable, yet so many businesses don’t allocate much in the way of resources into maintaining the relationships and looking for other ways to service existing clients… until the relationship is in jeopardy. You need to act like any customer is at risk at all times; because quite frankly they are. Things change very rapidly in business and the most solid customer can become an ex-customer very quickly.

Make sure your budget nourishes existing customer relationships; they are very expensive to replace.


Your best and most credible referrals come from existing customers. Other sources include your employees, your business and personal network, and other sources of word of mouth such as the Internet.

How do you ask for referrals? Do you allocate resources to acquiring them and just as importantly, do you reward people in some way for referrals?

The simple reality is that almost everyone is focused on themselves in some way, shape or form. What motivates a referral and what will make a person want to give more referrals. Direct compensation for referrals can be tricky but there are many ways to reward without crossing that line. Be creative and get referrals through intentional effort.

Prospecting, Cold Calling, and Networking

Cold calling and networking are active methods of sales where you initiate the contact with the potential customer and try to either get a sale or a referral to someone who will buy. This is the hardest and most time consuming method of generating sales but it can be effective when done over a longer period of time and with consistency.

You need to spend a lot of time and resources building relationships but for larger values of work, this is often the only way in.

New Leads from Marketing

Prospects are driven to you through your marketing efforts. By the time you are in communication they have already shown some interest in what you have to sell by virtue of them having contacted you.

The better your marketing engine is at pre-screening clients, the better your closing ratio will be and the less effort you will spend on sales calls. For some business types this is easy, but for others, direct interaction is required to determine fit.

Conclusion – Marketing Budget Allocation

You want to make sure your marketing and sales plans and budget address all four aspects of marketing and sales.

If you only need to spend on the first two items, congratulations, you have a great word of mouth business.

Otherwise, focus on marketing to generate qualified leads or  cold calling/networking. When you want to grow quickly or very large, this becomes even more essential as word of mouth takes time to build.

The boundaries are blurring but you need to market by plan, not by accident… the key is wise marketing budget allocation.


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