Question

Topic: Advertising/PR

New Market Entry Budgets

Posted by Pruz1271 on 5/14/2008 at 9:52 AM ET 250 Points
We are an established (40+ yrs), well-known (90% brand awareness) services brand in a large midwestern city. We do approximately $50mm in rev and are happy with results based on a marketing budget at 7% of sales. We are expanding geographically into markets where we have no penetration and are looking for advice on how to set the marketing budgets for new markets as well on expected ramp up time in terms of brand recall and steady state ROI for the marketing spend.
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RESPONSES

  • Posted by jcasalou on 5/14/2008 at 10:22 AM Member
    Don't you have forecasted sales figures for the markets that you are expanding to? I would think that you wouldn't expand into unknown territory without doing research.

    Also, how can you be expanding into a market if you can't penetrate it?
  • Posted by Pruz1271 on 5/14/2008 at 10:58 AM Author
    We have done research into the market and it is a viable market. We have no penetration to the new markets because we have not attempted it yet, not because it cannot be penetrated. However, our is a service based business completely driven by population count. In turn, revenue will largely be driven by the marketing spend against that population and how successful we are at messaging to that population and converting them to customers. The question really centers around how much should be spent and over what time period to become as efficient in the next market. Let's say the new market is 50% the size of the existing market. Should we spend 50% of the existing market budget? Or do we need to spend more since we have no brand? If we need to spend more over what period of time should we over spend? And when should we expect to be as efficient in our marketing ROI for the new market?
  • Posted by Peter (henna gaijin) on 5/14/2008 at 1:39 PM Accepted
    I am not sure we can provide any meaningful information.

    One issue is that percent of sales is not useful when you have no sales. So I am guessing you mean percent of expected sales at some point.

    But even clarifying this wouldn't help, as guideline numbers are pretty much useless in marketing, as they vary greatly from market to market, and even company to company within a market. It is very common to see questions asking about good response rates and other percentages, and the answer is almost always "we can't answer that".

    Ok, given this, it is very likely that as you are in growth mode for this new market, a number greater than the 7% you have for the current market (which presumably is in a more mature, lower growth rate phase) would be needed.

  • Posted by Tracey on 5/14/2008 at 3:24 PM Member
    I don't have a guideline for you, but typically when we go into a new market (b2b), we create a marketing plan and project costs for implementing it, in order to come up with a proposed budget. We continue updating and refining as we learn more about what worked and what didn't.
  • Posted by matthewmnex on 5/16/2008 at 11:42 PM Member
    What would be helpful would be to understand how you currently spend you budget. Are you looking for a localized approach? City by city? state by state?

    Are you advertising on local TV?
    In magazines?
    Bill Boards
    Busses?
    Taxi's
    radio?

    The main question to ask yourself is where are you currently spending your budget and what are the most effective channels.

    Then simply start to adapt that for the next city or state that you want to hit.

    Since you are in a service business, I can assume that there are already well established competitors in the new market(s) that you want to master. Take a look at your top 2 competitors and see where are they placing their ad spend. This should be a good jumping off point for you to start to go head to head with them.

    May I also comment please that those posters who simply added useless negative comments above are really unhelpful. Better to say nothing at all if you don't have something meaningful and helpful to ad please in the future :).

    Thank you

    Matthew

    Feel free to contact me for further ideas if you like
    matthewanxa at gmail dotcom
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