by Laurier Mandin
I’m never surprised when prospective clients ask me to propose a product launch budget based on vague goals and little other input. It happens more often than not.
While many of those entrepreneurs and even some CMOs legitimately haven’t yet identified a budget, most see it as a poker game. They fear that if they divulge how much money they’ve got, the agency may have been able to succeed with less and will waste or pocket the remainder. By not tipping their hand, they hope to pay less for similar results.
But engaging a marketing agency isn’t poker. It’s more similar to to planning a trip.
What does a booking agent need to know in order to help you? If not your destination (normally the very first question), then at least what you hope to achieve: time on the beach, business expansion, adventure or missionary work?
When we do an Innovative Product Go-to-Market Roadmap, defining and allocating the marketing spend is central to the strategic engagement. It will determine what can be achieved, how fast we can move, as well as the platforms, resources and tactics to be used.
In any of these cases, your wallet and ambitions will decide how far, how long, and the quality of amenities you can expect. Cut-rate planning can mean dingy digs and food poisoning rather than a dream honeymoon.
The longer the trip, the more vastly the overall spend will range—and the greater impact early course corrections will make. A milk run to the Circle K can be fairly spontaneous, but for a Mars mission, every detail must be micro-planned years in advance. Either way, success still rides on knowing where you’re going—and what for.
These are things ultimately determined by the agency’s expertise and way of tackling the challenge, based on the input you provide. Your goals chart the course, and budget is the fuel.
But you’ve got to have goals. Trouble is, even experienced entrepreneurs and CMOs often have no idea what it will take to achieve a successful product launch—or even what success looks like. It’s not something you can google, and there are no reliable rules of thumb because every product is different, and timing alone creates infinite variables.
Launching almost any product today compared to early 2020 would yield a totally different trajectory if you used the same strategy. While that was a particularly monumental shift, the landscape will never stop changing.
Here’s an insider caveat that makes things even more complicated: marketing agencies are in an awkward position when it comes to advising on budget.
Running ad campaigns is low-margin, high maintenance work. When done right, there is a ton of experimentation, testing and refinement. But agencies are usually compensated with a percentage of ad spend, not for how much work goes in or how well the campaigns perform. Bigger budgets tend to increase the product’s likelihood of success, and help the agency’s bottom line.
So conventional marketing agencies seldom gain by recommending modest launch budgets. The only incentive is that a low-ball recommendation (even irresponsibly low) may win the account. Still think you want prospective agencies to tell you how much to budget?
That’s why savvy clients focus on Return on Ad Spend (ROAS). This is a simple calculation of sales revenue divided by the amount invested in marketing. Anything over 1.0 means the advertising is delivering return on investment. Anything less means it is failing.
While ROAS alone is not a measure of profitability, the two are easily connected if you know your margins. Calculating these things are fairly simple, but achieving strong ROAS and a successful launch is the tricky part.
To do it, you need a budget designed around real-world numbers and SMART goals. (Specific, Measurable, Achievable and Time-Bound) That budget should be embedded in a Go-to-Market Roadmap that brings your goals together with honest branding, unique positioning, accountability—and an action plan.
You’re preparing to venture into unknown territory, where experimentation is sure to deliver surprises at every turn. What will matter most later is how well you aim the rocket on the launchpad, whether you have enough fuel to clear the atmosphere, and how nimbly you can make course corrections as new discoveries emerge. Here are the factors a diligent agency will want to know:
Budgeting for a product launch is never a simple matter, so go back and imagine what happens when an agency proposes a budget without these data points, targets and expectations.
An experienced marketing pro may be able to look at (somewhat) similar prior product launches, but in doing so will be making multiple assumptions that are risky to you.
If you’re preparing for a product launch and need help getting a real handle on budget—or are ready to work on your Innovative Product Go-to-Market Roadmap™, complete our Pre-Intake Questionnaire.
We’ll tell you straight-up if it looks like we’re not a fit—or if we see substantial gaps in your plan. You’re preparing for the journey of a lifetime, and whatever the destination, setting an appropriate budget is critical to your success.