The MT Position

For many of my marketing colleagues, this is the time they begin formulating their budget for the next fiscal year. And for as long as I can remember, it’s also the time when calls, letters and email begin to circulate, all asking the same question: “What is the right amount for a transit marketing budget?”

Often the response is simply to say, “The industry rule of thumb is that marketing should be in the range of one to three percent of operating expenses.” This is usually when I want to take out a hammer and pound on the thumb making the rule. Let me make it perfectly clear — this rule is bogus, it leads to bad budget policy and as long as it is applied, it will short change marketing efforts.

Why? Well, for starters, this perverse guidance goes back more than 20 years when transit marketing wasn’t as sophisticated as it is today. Those were also the days when marketing was undervalued and underfunded, and more often than not the first thing cut in hard budget times.

Today’s transit managers and their marketing staffs are much more market and customer driven. Their awareness of good marketing practices is better and their overall support of marketing as a key strategy to recruit and retain riders, as well as protect their revenue stream, is keener than ever.

Even so, this bogus rule of thumb is still around. But is there a better rule that can replace it and better reflect how transit marketing is done in today’s world?

The answer doesn’t lie in a rule. The answer lies using a process that takes into account the marketing functions and activities that an individual system engages in, then building a budget accordingly. Ask questions like how many materials does your agency still need to have in print? Are things like signage and on board information updated regularly? When it comes to major cost categories like Web sites, advertising, publications, etc., it may be especially helpful to compare what your peers are doing and spending. Exchanging this type of information can lead to a better budget perspective. Remember though, that size matters when it comes to costs, so make sure you use good comparisons.

Build on this idea by looking at areas where performance goals will help determine what the cost of achieving them will be. Take broadcast advertising for example. Reach to target markets and frequency of message are important in media planning, and gross rating points (GRP) are a good representation of measuring how much media you effectively need. So, if you need to achieve a certain reach and frequency level, you can estimate the average costs per GRP for your market and better budget in that area. Similarly, if you are in charge of a call center and need to achieve a certain level of calls being handled, then you’ll need to budget accordingly for staff and equipment.

Whatever method you use, bring the hammer down on a very bad and often unrealistic rule of thumb. It’ll feel so good!

Joe Caruso is Senior Consultant for Brecon Hill Consulting. He’s the former marketing director for the Milwaukee County Transit System (WI) and has over 33 years of transit marketing experience. He welcomes your comments at jcaruso@breconhill.com.

This entry was posted on Friday, April 4th, 2008 at 7:38 am and is filed under Transit Talk. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.