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Topic: Strategy

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Expected Revenue From Marketing Plan

Posted by jjspelman on 250 Points
I was asked to provide a marketing plan and a budget. No problem. Now I am being asked to estimate expected revenue from said marketing plan. Personally and professionally I feel this is a completely ambiguous and so suspect to speculation.

If there were such a formula in existence, there would be no such thing as a small business because everyone would simply use the formula and grow exponentially.

Any thoughts appreciated.

  • Posted by Jay Hamilton-Roth on Accepted
    You can offer to conduct a test to gauge effectiveness (clickthru rate, etc.) and then project expected visits/interest. However, just because you bring a prospect to them, doesn't mean the company will close the sale. Do they have sales data/plan they can share with you?
  • Posted by jjspelman on Author
    Thank you, Jay, for your prompt reply. I agree wholeheartedly with your comment regarding "...close the sale". We can only lead the horse, not make it drink, as the old proverb goes

    There is nothing they can provide in terms of sales plan, although sales data would be easy to come by.
  • Posted by saul.dobney on Accepted
    Don't see a problem with this being asked. How many people will the marketing reach? What will the conversion rate be? If you reach 10,000 people with the marketing scheme, with a conversion rate of 5% you make 500 sales. From which you can calculate revenue, and then ROI.

    In practice, there will be other factors to consider and a bunch of noise. For instance, since there will be an ongoing sales run-rate and some of the marketing will just act to reinforce these existing sales, you'll really be looking at lift in sales over a base figure. And secondly, a good campaign should generate longer term brand equity to make sales easier in the future.

    These can be measured scientifically through test and control advertising studies. So you should be able to suggest methods for measurement of marketing effectiveness, and if required, to run small pre-tests to try to pre-estimate the numbers prior to full-spend.

    And if you're not in control of the conversion (eg it relies on a sales team or online customer experience), then you can measure as number of leads generated, visits etc - but their sales or online team should know lead-to-sales conversion rates to fill in gaps. You may even be able to work with your client to improve lead-to-sales rates too.
  • Posted by dubois on Accepted
    Welcome to MarketingProfs. If your marketing plan is for a scope of new activities that you would provide, then the client would be remiss in not asking you for a revenue impact projection. If it's the client's whole marketing plan, then IMHO the revenue target should come from the client in the beginning.

    As saul.dobney pointed out, you can make an educated guess about lead gen and do the math. Brand equity and revenue acceleration are harder to quantify. It's all subjective.

    As for whether marketing will pay for its budget in first-year delta revenue, well, that's seldom the case. Marketing is an investment. The client has to start somewhere.
  • Posted by Peter (henna gaijin) on Accepted
    Every marketing plan I have done has included expected sales/revenue. Of course, this is an estimate, but with some testing and/or decent market knowledge, you can come up with a reasonable estimate that may be within an acceptable range in relation to what reality would bring if the plan was implemented.

  • Posted by joy.levin on Accepted
    Many marketing plans include a few scenarios, under which there are certain assumptions. For example, if you know the size of the target market, you can create scenarios in which you capture various percentages of the market and come up with your ROI under each. As long as they are reasonable assumptions, you can develop a plan that will be achievable and defensible. Moreover, by measuring actual success against this plan periodically (every quarter, for example), you'll be able to tweak things to more effectively meet longer term (annual) goals.

    Good luck!
  • Posted by mgoodman on Accepted
    How can you create a marketing plan without understanding the ultimate objective? Is the driver awareness? Initial trial? Repurchase? Cross-sell? Up-sell? Lead generation? Sales volume? Revenue? Short-term profit? Long-term profit? How much? How will you measure results or know if it's working?

    And how can you tell if the marketing plan you develop will, or can possibly, deliver the objective if you don't have some sense of the projected result? Maybe you're planning to spend too much, or maybe the marketing budget is not realistic to deliver the objective? Or maybe the objective is too high?

    All of this is to say that any marketing plan that doesn't focus on the goal, and project likely/possible results, is a one-handed clap. Marketing plans are supposed to accomplish some measurable objective, not just spend money aimlessly. You MUST project the results before you begin, even if it is based on crude assumptions.

    As joy.levin points out, you can always make best-case, worst-case and most-likely assumptions, and base a sensitivity analysis on them. If you find that your best-case assumptions fail to achieve the desired objective, you at least have a chance to modify the plan (or the objective) before you blow the whole budget on a plan that never had a chance to succeed.
  • Posted by Shelley Ryan on Moderator
    Hi Everyone,

    I am closing this question since there hasn't been much recent activity.

    Thanks for participating!

    Shelley
    MarketingProfs

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