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Penelope

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This is a question that I know will have no right answer. However, I am going to ask it anyway:
When it comes to marketing, what formula do you use for figuring out how much money goes where? That begs the question: IS there a formula?
 

gillumhouse

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I think I have heard the formula of 10% of revenue for marketing. That would have limited me mightily!!
I have certain Directories that I consider a given and I consider my Assoc dues as Marketing although it goes under trade associations on taxes. I then look at who is my target market this year and look at the rate cards or online directories for those interests. Then I look at what I can afford among those. This year I am doing something new - I am running a classified ad in a newsprint magazine that is sent to government and government contractor offices. The first one just came out. Now to see how effective it is. Can't beat the price except with free which it wasn't.
 

Penelope

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Does that include: rack cards, business cards, listings, donation GCs, and the like?
 

Morticia

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I've heard, and seen in action, 10% of your income revenue should be spent on marketing. For one place we looked, that meant $20,000/year. But, he was pulling in over $200k so it was working!
 

Morticia

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Does that include: rack cards, business cards, listings, donation GCs, and the like?.
penelope said:
Does that include: rack cards, business cards, listings, donation GCs, and the like?
For me it includes:
  • All printed materials
  • All directory listings
  • All association fees involved in marketing the biz
  • Website listing/hosting fees (my website)
  • All advertising (ads in newspapers, etc)
I think there's some question as to where donated GC's fall so I won't add those in here. I'm also not counting repeat guest discounts or giveaways, wonder if I should?
Sometime I should add all of that up. I know I don't spend 10% but it's a pretty big chunk of change regardless.
If I paid for these things, they would be included as well:
  • Marketing person (someone to do the work)
  • Website updates
 

briarrosebb

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All,
I have seen a IRS field agent document used in audits that says 6 - 7 percent of revenues is normal for B&Bs. I agree with Bree's listed items. We exclude travel agent commissions and booking fees to travel sites. We view these more like discounts to revenue although you can argue otherwise.
 

JunieBJones (JBJ)

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I think I have heard the formula of 10% of revenue for marketing. That would have limited me mightily!!
I have certain Directories that I consider a given and I consider my Assoc dues as Marketing although it goes under trade associations on taxes. I then look at who is my target market this year and look at the rate cards or online directories for those interests. Then I look at what I can afford among those. This year I am doing something new - I am running a classified ad in a newsprint magazine that is sent to government and government contractor offices. The first one just came out. Now to see how effective it is. Can't beat the price except with free which it wasn't..
gillumhouse said:
I think I have heard the formula of 10% of revenue for marketing. That would have limited me mightily!!
I have certain Directories that I consider a given and I consider my Assoc dues as Marketing although it goes under trade associations on taxes. I then look at who is my target market this year and look at the rate cards or online directories for those interests. Then I look at what I can afford among those. This year I am doing something new - I am running a classified ad in a newsprint magazine that is sent to government and government contractor offices. The first one just came out. Now to see how effective it is. Can't beat the price except with free which it wasn't.
Are you saying you spend more than 10% on marketing?
 

JunieBJones (JBJ)

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Nothing donated is written off by this inn.
My list includes:
  • Memberships (Chambers and Professional Associations)
  • Online Directories
  • Domain Name Rego
  • Hosting
  • Online Reservation Service
  • Rack cards
  • Print Ads (which never amounts to a hill of beans so I won't waste another penny on these no matter what!)
  • TV Local station slideshow Ad (which never amounts to a hill of beans so I won't waste another penny on these no matter what)
  • Postage
  • envelopes/paper (for gift certificates, business cards, mailings)
I track all discounts for my own reporting purposes. I do not claim discounts, that doesn't make any sense - altho YES I do offer it to get people to book a room - so in effect it is marketing, but it is just a rate I offer, I can't deduct my rates. It is not a loss, it is not an expense. One good reason - let's say we raise our rates and ended up making the same as last year. Boo hoo did we not increase occupancy? Well actually since we gave away fewer discounts or lesser discounts we had less rooms to flip and MADE money.
My total for marketing was about $2000 for 2007. I won't go above that if I can help it. A one-time big chunk was $450 for a print ad in a very special brochure. WASTE OF MONEY, again.
If I required a more expensive listing to be FEATURED INN on a directory because there were 10 inns near me I would have to do that, but there aren't so I don't.
PS the formula is diff for each inn and each location. Most bang for your buck is my formula. I recently emailed a Balloonist (no not the clown variety but hot air type) to let him know that IF he joined a certain assoc he would increase bookings dramatically. The balloon cost $50k and the insurance is sky-high (excuse the pun) so he cannot join - but if he did, his return would be worth it.
 

Penelope

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I am trying to figure out the method here. Is it something that you say, "okay, I have to wait until Jan to see what we made in the past 12 months to know what I can spend for marketing."? Or is it more of a "I know in my head what I NEED to do and I'll do that" kind of thing?
I guess, more plainly, is it pro-active or re-active to revenue?
 

Morticia

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Nothing donated is written off by this inn.
My list includes:
  • Memberships (Chambers and Professional Associations)
  • Online Directories
  • Domain Name Rego
  • Hosting
  • Online Reservation Service
  • Rack cards
  • Print Ads (which never amounts to a hill of beans so I won't waste another penny on these no matter what!)
  • TV Local station slideshow Ad (which never amounts to a hill of beans so I won't waste another penny on these no matter what)
  • Postage
  • envelopes/paper (for gift certificates, business cards, mailings)
I track all discounts for my own reporting purposes. I do not claim discounts, that doesn't make any sense - altho YES I do offer it to get people to book a room - so in effect it is marketing, but it is just a rate I offer, I can't deduct my rates. It is not a loss, it is not an expense. One good reason - let's say we raise our rates and ended up making the same as last year. Boo hoo did we not increase occupancy? Well actually since we gave away fewer discounts or lesser discounts we had less rooms to flip and MADE money.
My total for marketing was about $2000 for 2007. I won't go above that if I can help it. A one-time big chunk was $450 for a print ad in a very special brochure. WASTE OF MONEY, again.
If I required a more expensive listing to be FEATURED INN on a directory because there were 10 inns near me I would have to do that, but there aren't so I don't.
PS the formula is diff for each inn and each location. Most bang for your buck is my formula. I recently emailed a Balloonist (no not the clown variety but hot air type) to let him know that IF he joined a certain assoc he would increase bookings dramatically. The balloon cost $50k and the insurance is sky-high (excuse the pun) so he cannot join - but if he did, his return would be worth it..
JunieBJones (JBJ) said:
My total for marketing was about $2000 for 2007. I won't go above that if I can help it. A one-time big chunk was $450 for a print ad in a very special brochure. WASTE OF MONEY, again.
I just spent that on 3 listings...but, yes, there's a lot of competition here and the plan is to next year drop the most expensive listing I have. They keep telling me they are getting the town out there in front of potential guests but we just watched as 2 weeks' running a competing town ran ads in our paper telling about the 'midnight store openings' for Friday. Did my local group have an ad? No. Have I seen an ad anywhere? One.
Next week is the annual meeting where they are presenting the new chamber 'idea'. This group doesn't want a chamber because most businesses will dump the local group to join a chamber at 1/7 the price. So they are trying to have the chamber be an additional fee.
Already a few B&B's have dropped their listings with the local group. It's unconscionable that they charge the smallest businesses in town the largest fees.
 

Morticia

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I am trying to figure out the method here. Is it something that you say, "okay, I have to wait until Jan to see what we made in the past 12 months to know what I can spend for marketing."? Or is it more of a "I know in my head what I NEED to do and I'll do that" kind of thing?
I guess, more plainly, is it pro-active or re-active to revenue?.
penelope said:
I am trying to figure out the method here. Is it something that you say, "okay, I have to wait until Jan to see what we made in the past 12 months to know what I can spend for marketing."? Or is it more of a "I know in my head what I NEED to do and I'll do that" kind of thing?
I guess, more plainly, is it pro-active or re-active to revenue?
You have to be proactive. We made about 20% less this year than last but I am spending at least 10% more on marketing. Do we have it? No. Can we afford not to 'find' the money? No. So, no dinners out until spring. There, that just paid for the marketing. Some of my friends are hitting their retirement accts to make their mortgage payment. You keep plugging or you close up shop. We took out a loan to cover dental expenses so we're not 'cash poor'. And it's not getting any better aeround here anytime soon.
 

Penelope

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I know this is a cliche, but I have heard that in a slower economy, marketing money needs to be increased. Of course, I have no formal experience with this, but it always made sense to me. I can't imagine how painful it would be, financially, to find money where it doesn't exist.
 

Morticia

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I know this is a cliche, but I have heard that in a slower economy, marketing money needs to be increased. Of course, I have no formal experience with this, but it always made sense to me. I can't imagine how painful it would be, financially, to find money where it doesn't exist..
penelope said:
I know this is a cliche, but I have heard that in a slower economy, marketing money needs to be increased. Of course, I have no formal experience with this, but it always made sense to me. I can't imagine how painful it would be, financially, to find money where it doesn't exist.
Hey, I don't NEED new shoes, right? You cut where you have to but it's NEVER where the guests can see it. So, my heat is down 2 degrees on MY side of the house, we've been eating soup everyday for lunch & dinner and we determine whther or not we NEED to do something for ourselves.
We are replacing 20 year old carpet because it HAS to be done. That goes right along with the marketing...you can't let the place fall down around you. Guests will put up with that for only so long before they move on. Hubs is painting all of the bathroom baseboard heaters to make them fresh. Paint is cheap. But it's worth the world to make the place look good. And I'll be announcing the changes from the rooftop.
 

Morticia

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JunieBJones (JBJ) said:
penelope said:
I know this is a cliche, but I have heard that in a slower economy, marketing money needs to be increased. Of course, I have no formal experience with this, but it always made sense to me. I can't imagine how painful it would be, financially, to find money where it doesn't exist.
\can of worms alert
when we bought this place we moved in and were handed a folder with all the EXPIRED directories and marketing. No guests, just paid hundreds of thousands for this place and had to spend more.
I can be honest and say we nearly starved that first year - plus had to buy large room rugs for down here we didn't count on and a couple other things.
We paid all the directories BEFORE we even bought the place, just to keep them active. The PO's also gave us a list of everything due to expire.
 

JunieBJones (JBJ)

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I know this is a cliche, but I have heard that in a slower economy, marketing money needs to be increased. Of course, I have no formal experience with this, but it always made sense to me. I can't imagine how painful it would be, financially, to find money where it doesn't exist..
penelope said:
I know this is a cliche, but I have heard that in a slower economy, marketing money needs to be increased. Of course, I have no formal experience with this, but it always made sense to me. I can't imagine how painful it would be, financially, to find money where it doesn't exist.
can of worms alert...!
when we bought this place we moved in and were handed a folder with all the EXPIRED directories and marketing. No guests, just paid hundreds of thousands for this place, moved 3000 miles with those expenses, had to get self employed insurance and had to spend more, much much more.
I can be honest and say we nearly starved that first year - plus had to buy large room rugs for down here we didn't count on and a couple other major expenses. Everything came up due and we had to pay it or have no guests. So it is a definite you pay to bring them in, being proactive.
Warning to all aspirings - there is no such things a turn-key, it is an illusion. So make sure everything is in ORDER before you sign anything.
 

gillumhouse

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I think I have heard the formula of 10% of revenue for marketing. That would have limited me mightily!!
I have certain Directories that I consider a given and I consider my Assoc dues as Marketing although it goes under trade associations on taxes. I then look at who is my target market this year and look at the rate cards or online directories for those interests. Then I look at what I can afford among those. This year I am doing something new - I am running a classified ad in a newsprint magazine that is sent to government and government contractor offices. The first one just came out. Now to see how effective it is. Can't beat the price except with free which it wasn't..
gillumhouse said:
I think I have heard the formula of 10% of revenue for marketing. That would have limited me mightily!!
I have certain Directories that I consider a given and I consider my Assoc dues as Marketing although it goes under trade associations on taxes. I then look at who is my target market this year and look at the rate cards or online directories for those interests. Then I look at what I can afford among those. This year I am doing something new - I am running a classified ad in a newsprint magazine that is sent to government and government contractor offices. The first one just came out. Now to see how effective it is. Can't beat the price except with free which it wasn't.
Are you saying you spend more than 10% on marketing?
.
Heavens yes!!! When I opened I had no revenue. I spent a ton of money that year. My % went down this year because my revenue went up by about 30% but that may be due to the fact that I just finished an ad campaign of over $3000 (this is over and above my usual expenditures) in partnership with the State and the winery. However, after getting our reimbursement, my total cost of that campaign was 12.5% of the total. I had to order brochures for 2009 because I am almost out. That is going to be about $700 for 4000 (very heavy paper but I like the quality).
 
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