This has always been an elusive concept no matter in what industry you are working. There are some rules of thumb that are taught to us in marketing school but there is no golden rule or standard practice. There are four main elements to consider when creating your Promotional Mix of Advertising, Personal Selling, Sales Promotion and Public Relations. Many lodging operators, particularly those in hospitality, use one of four budgeting methods, which are applicable to retirement residences:
1. Percentage of Sales
2. Desired Objective
3. Competitive Parity
4. Zero-Based Budgeting; also known as the All You Can Afford method
How much you allocate to each of the four main elements should be determined by the specific activities you choose to do and what your main objectives are for each of the four elements in your Promotional Mix.
1. Percentage of Sales
Most operations have a history of past expenditures and the results of those efforts. Many owners/managers believe a fair allocation of 2-8% of forecasted revenues is adequate under normal operating procedures.
2. Desired Objective
This method is more time-consuming but also provides more accurate results based on setting well-defined objectives. If you have a particular program you wish to invest in, then you need to forecast and predetermine what financial results you must realize in order to set the costs.
3. Competitive Parity
Many similar operations will practice what their competition is doing. What you spend will vary depending on whether or not youre running as Independent Living, Private Pay Assisted Living, or Private Pay Licensed Care. The Diamond Standard will also influence your budget.
4. Zero-Based Budgeting
This is often used as the marketer must justify the expense to their owner or general manager on a month to month basis. The Manager will then review the cash flow and determine whether or not they can afford the expense and how best to use the funds.
Again, this isn't an exact science but past practices that have been tried and proven profitable.
Still have questions? Feel free to contact me in person via email to [email protected] or telephone me at 604.984.7445 and I'll help fill in the blanks.
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