In drawing up a budget for marketing plan, certain ground rules should be observed whose importance goes beyond the need to make the budget document clearly understandable and useful for the marketing man, the salesman, the advertiser and the accountant.
Reference to objectives: Normally any given marketing activity corresponds to a specific objectives set out in the marketing plan. Sometimes several activities serve the same objectives or one activity may correspond to more than one objective, as it helps to all, attention to the priorities and shows how they are being followed.
Specification and cost details: Indications as to how the total cost for a given activity is arrived at are helpful in two ways: First, the budget becomes more readily understandable to those who have to approve it, and fewer questions of detail remain unanswered. Secondly, budget adjustments that may become necessary at a later date are more quickly and easily made if sufficient data are indicated.
Value Analysis: This modern term marks the very simple principle of showing quantitatively what a given sum of money buys and thus goes beyond cost specification. The following example will illustrate the difference between cost analysis and value analysis. ‘ To state that $5000 buys fifteen one page one color advertisements in papers ‘A’, ‘B’ and ‘C’ is cost analysis. If the same expenditure is estimated to capture an audience of so many thousand people representing “X percent” of the target audience, this is value analysis.
Whether a marketing plan is good or bad will only be discovered by putting it into operation. If it works, if it is right in its determination of marketing objectives and in the section of activities to be undertaken, and if events show that satisfactory progress has been made towards those objectives, then the plan can be described as a good one but no marketing situation is ever completely static. What is an eminently sound plan for one year may be completely inadequate in the following year. In any event, it is necessary to set up a mechanism which permits actual performance to be compared with planned performance throughout the planning period since it is simply not enough to compare plan and results at the middle of that period. If proper controls are imposed regularly and if they start as early as possible in the planning period any adjustment and changes needed later can be made sooner and at a lower cost.
It obviously makes little sense to have a plan with nearly quantified objectives and aims, but to neglect the assessment of the actual results. Even though this may be recognized by many otherwise excellent marketing plans fail to plan for control from the start.
There should be a mid-year comprehensive review of the state of the business of modifying the current, but also for acting as guide to the following year’s plan. The end-of-year sales total can be one yardstick for measuring the plan’s effectiveness or lack of effectiveness. In fact, it is strongly recommended to set up specific control procedures for each individuals activity proposed in the plan. Thus, the regular measurement of distribution effectiveness and distribution density should be included together with procedures for measuring the penetration and effectiveness of advertising. These are just examples. In practice the plan of operation in itself will dictate the controls that have to be instituted.
Plan control and plan reviews thus serve a dual purpose: they enable correction to be made in cost, advertising spending and distribution efforts throughout the planning period and also supply additional raw material as it were for the preparation of the subsequent plan.