What is a marketing cost analysis?
Marketing cost analysis is a technique that helps assess the total costs of all activities in a marketing campaign. The resources invested include money, employee work hours, media purchases, and other resources. The analysis helps the company gain a clear picture of the costs of marketing activities. The intangible resources such as time and energy are hard to quantify but are critical in computing the general impact of the campaign.
Why Conduct a Marketing Cost Analysis?
Businesses conduct a marketing cost analysis to identify marketing campaigns’ potential risks and gains. The objective of undertaking a cost analysis is to understand how much the promotion and supply of a product will cost. The marketing cost analysis then facilitates the creation of an accurate and contextualized approximation of the profits.
Conducting a thorough marketing cost analysis before investing any resources in any new marketing campaign can help you make informed and wise decisions with your marketing budget and plans.
How to Determine the Expected Marketing Costs?
Before venturing into a marketing campaign, it is vital to understand both the current and the expected costs. When computing all the costs, consider Kickstarter funds, investments, and existing profit streams. Other expenses to factor in are:
● Taxes on the products
● Supply and operating costs
● Staff and training expenses
● Shipping or handling costs
Use existing analytics to estimate the costs and expenses to be involved. If it is a new venture, conduct research online and get insights from experts to provide a thorough estimation.
In most campaigns, money is a critical consideration, but it is essential to consider the brand impact, workforce hours, and the alternative implementations of the budget.
Can the Profits Offset Expenses?
You should consider if the potential profits can offset the expenses incurred. If not, drop the campaign. Yields can be estimated by:
● Profits made
● Expenses cut
● Customer acquisition
● Time and effort involved
You can use analytical research from other past projects to get a rough estimate of the potential profits and potential expenses. Now, compare the two and make a marketing cost analysis to see if the campaign is worth the investment.
Critical Considerations for Marketing Cost Analysis
Allocation of funds for different marketing activities
In deciding how to allocate the cost to other marketing activities in a campaign, the marketing manager should apply quantitative or qualitative analysis to assign each activity with the resources. That way, there is a clear indication of how much each activity is utilized.
The Costs to be Allocated
The costs arising from a marketing activity such as creating, preparing, planning, and the costs incurred later, such as commissions on sales, among other variable costs, must be allocated to the specific marketing activity.
Can Costs be allocated to different marketing activities?
Depending on the company’s financial policy, all the costs that are identified and linked to a particular marketing activity can be allocated. However, costs that cannot be related to a specific marketing activity cannot be assigned.