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92TOBACCOOUTLETBUSINESSJULYAUGUST2009MarketingStrategieSBYMIKEKIRKWOODOneox1ethemostdix1efcultfnancialdecisionsx1eacingsmallbusinessesishowmuchtospendonmarketingandpro-motionx14particularlyinachallengingeconomy.Insomein-dustriespromotionalexpenditurescanexceed20percentox1etotalsalesbutinindustriessuchastobaccoretailingthefgureismorelike2percentox1esalesonthehighend.Herearex1eourcommonandtestedmethodsusedbyarangeox1ein-dustriestodeterminebudgetsx1eorallmarketingcomponentsadvertisingsalespromotioneventsandpublicrelations1.TheAffordableMethodManysmallbusinessessettheirmarketingbudgetsatwhattheythinkthecompanycanax1ex1eord.Basicallyabusinessownerconsultswithaccountantsandaskshowmuchheorshecanax1ex1eordtospendonmarketing.Thismethodox1esettingbudgetsdoesnotrequirealotox1ethoughtandcom-pletelyignorestheroleox1emarketingandpromotionasaninvestmentinsales.Italsomakeslong-rangemarketplan-ningverydix1efculttoaccomplish.2.ThePercentage-of-SalesMethodThisisoneox1ethemostpopularmethodsox1ebudgetingx1eormarketingexpenses.Smallbusinessesallocateaspecifedpercentageox1esaleseithercurrentoranticipatedx1eortheirmarketingbudgets.ForexampleLetx19ssayatobaccooutletretailerintheMidwesthadsalesox1e500000x1eortheyear.Theownerallocates2.5percentox1ethosesalestoafxedmarketingbudgetwhichis12500calculatedbymultiply-ing500000x0.025.Thereareanumberox1eadvantagestocalculatingamar-ketingbudgetusingthismethod.Firstusingapercentage-ox1e-salesmethodmeansthatthemarketingbudgetwillvarywiththesales.Thiswillsatisx1eyaccountantsorfnancialox1ef-cersbecausetheyusuallylikeexpensestomirrorthedirec-tionox1ecorporatesales.Thebudgetremainsfxedagainstsalesvolume.Secondthismethodencouragescompetitivestabilitytotheextentthatcompetingtobaccoretailerswillspendapproximatelythesamepercentageox1etheirsalesonmarketing.3.TheCompetitiveMethodSomecompaniessettheirmarketingbudgetstoachievex1cshareox1evoicex1dparitywiththeircompetition.Basicallythismeansthatonemerchantfndsouthowmuchthecompeti-tionisspendingonmarketingandthenspendsthesame.Therearetwosidestothisstory.Onthepositivesidemain-tainingrelativeparitywilllikelyeliminatepromotionwarsinthemarketplace.Onthenegativesidethismethodassumesthatthecompetitionknowswhattheyaredoingx14whichmayormaynotbetrue.4.TheObjective-TaskMethodThismethodismostox1etenconsideredasthebestbudgetingmethod.Thebudgetingprocessunderthismethodbeginswithobjectiveswhichcanbethoughtox1easthex1cwhatdowewanttoaccomplishx1dprinciples.Thebudgetisdevelopedbycalculatingtheexpendituresnecessarytoachievethedesiredsalesobjectives.Althoughthisbudgetingisveryrealisticastothegrowthandcommunicationsneedsox1eacompanyitisox1etenlimitedbytheceilingsetbymanage-ment.Thetacticsthatacompanymaydeemnecessarytoachievethegrowthobjectivesmayexceedthemoniessetasidebymanagementx1eoragivenyear.Nonethelessthismethodwillprovetobethemostlogicalx1eoranymarketingorpromotionalbudgeting.Itisimportanttonotethatpreparingmarketingandpro-motionalbudgetsshouldnotbetreatedlightly.Atthebe-ginningox1etheplanningstagestobaccoretailersshouldbeclearonwhattheirsalesandrevenuegrowthobjectivesarex1eorthecomingyearsandbepreparedtostaythecourseox1etheplantoachievethoseobjectives.Deviatingx1eromtheplanwilldrasticallyalterexpectedresultsmakingitdix1efculttoevaluatetheex1ex1eectivenessox1etheplanandjustix1eythean-nualexpenditures.TOBTheStrategyofNumbersHowx1cofox1bmxfx19xfccux1bxfx1cx13mxfx1bx17x13x1cx16x19x15budx15x13x1c.