When given the choice to battle rush-hour traffic, bathe in poison ivy, or build the budget for the following year, the latter might be the third choice for some marketers.
It’s not that the process itself is so cumbersome: Incorporating new ways to allocate funds and shed unnecessary expenditures can be a liberating, creative experience. The challenge is that so many unforeseen obstacles can surface, such as shifts in the market and the advancement of tech, that the budget is often in need of modification the moment it’s finished.
Other industry trends and shake-ups, such as major ILS mergers, can alter the budget needs for online marketing and force a rethinking of advertising spend.
But a smart marketing budget can be integral to meeting the yearly ROI ambitions of a community, and creating one doesn’t always have to be a stressful chore. That, according to several industry experts who shared their expertise on how to construct a budget and avoid some common pitfalls.
“We usually use the ‘Rob Peter to Pay Paul’ rule, in that we reallocate monies from a source that isn’t performing well to one that is,” says Kevin Thompson, senior vice president of marketing at Bell Partners. “While the budget spend will remain the same, better results can drive down the cost per lead and lease.
Complacency Is the Enemy
Analyzing previous budgets is a solid practice; using them as a guidepost to develop a new one is not.
“A lot of times, people start with what they did last year,” says Jennifer Anderson, director of B2B marketing for RentPath. “But when I build my budget, I challenge myself to build it based on what really matters. And you can do this whether your budget is $300,000, $3 million, or $30 million.”
When looking at the broad-level objectives, some overlap from the previous year undoubtedly will exist. But marketers must understand how certain channels are performing and whether they’re worth keeping.
Anderson not only looks at each channel, but also at how each program—such as web personalization, paid social posts, or digital ads—is performing. That allows her to understand how that specific program performed in relation to her objectives before making investment decisions.
When building a budget, Anderson recommends starting with high-level objectives, mapping out goals, and quantifying how you’re going to measure success. Once the objectives are established, the resources, research, and technology needed to reach those initiatives can be determined.
“I look at: what do I need to run the business as it is today?” Anderson says. “What do I need to grow the business? And what do I need to plan for as a potential investment—even if I don’t want to ask for the money now?”
For instance, an owner–operator might want to invest in a call center to streamline lead management and acquisition but isn’t quite ready to do so. But what if goals for 2019 and 2020 accelerate?
In addition to dedicating funds for possible time-line acceleration, Anderson recommends allocating 2% to 5% of the budget to invest in or test new technologies. Setting that money aside at a manage-risk level can result in sizable opportunities, she says.
“You should always have money set aside for testing,” Anderson says. “If you’re a marketer and you’re doing the same thing year after year, all you’re doing is antiquating yourself. There’s no way the things you’ve done the past few years—or even the past year—can continue to work at the same level they have. You have to constantly be innovating, and the only way to innovate is to test.”
Pilot It, Test It, but Don’t Overreact to It
With tech evolving on seemingly an hourly basis, ignoring it simply isn’t an option. But just because something’s new doesn’t mean it’s going to provide an immediate upgrade from your current system or process.
“When the marketing team discovers a potentially strong new product—a lead generator, reputation monitoring, analytics reporting software, or something in that spectrum—we make every effort to at least test and pilot it,” Thompson says of Bell Partners’ process. “We then propose to our internal clients and external owner–partners to add those products that are successful to the budget considerations.”
Bell Partners operates in a results-oriented world. The primary factor in adding a product to or subtracting one from the budget is performance. For instance, if a lead generator or ILS isn’t producing the desired conversion rate or cost-per-lead benchmark, the firm is likely to replace or upgrade it with a product that does.
“Our decisions are based on analytics, previous results, customer service experiences with our vendors, and, obviously, pricing tiers,” Thompson says. “We’re surgical in our recommendations, making community-specific recommendations as opposed to just placing products across the entire portfolio.”
Bell’s analysis determined that 71% of the company’s physical prospect traffic originates from an Internet source. Within the Internet category, Bell has prioritized the budgeted spend in distinct fashion: SEO campaigns across every page of every website come first. SEM/PPC (search engine marketing/pay per click) is next, followed by social media optimization. Other initiatives, such as reputation management and daily Craigslist postings, are always a consideration in the media mix, along with the standard ILS subscriptions of usually two to three per community.
“Programs that perform by driving leads and creating higher conversion rates will always bubble up to the top,” Thompson says. “While lead-gen products get top billing, we also incorporate supporting marketing programs, such as reputation management and social media, into our budget recommendations.”
The Nonnegotiables and Psychographics of Budgeting
Owner–operator CAPREIT requires certain nonnegotiable items in all its budgets, including a website; SEO, which helps communities stay on the first page of search engines; branded materials; and a resident survey program. The company also makes certain to allocate funds for CRM services to capture leads and manage workflow. Once all the parameters are established, the budget-building process begins.
“We begin by understanding the market audience and creating that persona,” says Katie Nelson, director of marketing for CAPREIT. “What’s [residents’] preferred method of communication, and how do they interact and connect with the rest of the world? What speaks to them? We look deeply into the generational types, as we’ve found that your target audience will most likely be two distinctly different generations. You have to have a handful of different ways to connect to each audience.”
CAPREIT remains flexible by keeping 1% to 3% of the budget available for contingency funds. For instance, the company’s 2018 budget is moving toward a more organic strategy for lead capturing. The firm is also getting more creative with search engine marketing. Nelson remains acutely aware of trends within each market to indicate what’s driving leads to certain communities.
“We analyze the budget frequently,” Nelson says. “On the marketing side, we’re always analyzing our marketing spend—is this working? Is it time to step out of this and try something different? We have multiple forms of metrics we watch, to make sure our advertising dollars are doing what they should be—driving qualified leads.”
Avoiding Potential Hazards
As a longtime consultant in the industry, Jim Kjolhede has a three-point message to share: Don’t ask for the budget too early, don’t be overly specific, and provide guidance for younger associates.
“Don’t require the budget to be done in August or September, because, then, you’re projecting 16 months away,” says Kjolhede, president and founder of Satteron Enterprises, a multifamily consulting firm. “That’s four more months of revenue from the current year that you can’t yet take into account. And the toughest thing to predict is revenue.”
With some budget details often obsolete by the time the budget is unveiled, being too specific only creates ambiguity, according to Kjolhede.
“One common budget mistake is dealing in too much detail,” Kjolhede says. “A budget is a projection, and I always say: ‘Don’t write down $176; write down $175 or $180.’ Don’t be more precise than what you’re capable of.”
Kjolhede is also a proponent of planning ahead for unexpected expenditures. Granted, the list of unforeseen changes is lengthy, including natural disasters, government intervention, single-family stimulation, changes within Fannie Mae and Freddie Mac, regulatory or tax changes, overseas investment, and geopolitical factors.
But there are some changes a community will be aware of, such as next-door developments and nearby road construction, and others that can be researched.
“I always have one of my associates get in touch with a city water official to determine whether they foresee any [price] increases the following year,” Kjolhede says. “If so, what month? Then, you can plan your budget to compensate for the change the month after it takes effect.”
Kjolhede also recommends looking at electricity futures, as well, and managing expectations with new associates. Assigning a mentor who has constructed a solid budget in the past can help prevent a first-year disaster.
Building a smart marketing budget can be tricky. It entails a multitiered process that can’t simply be rehashed from the previous year. But while they’ll never be 100% accurate, efficient marketing budgets can be a determining factor in an apartment operator’s yearly revenue ambitions.
