One Company's Budget: A Nice Consistency
Last year, PJ Madison's, a producer of organic ice cream, spent nearly a quarter of its revenue on marketing -- and it was money well spent. The San Antonio-based company expanded its store count from 200 to 2,000, earning its pints freezer space in supermarkets and natural-foods grocers such as Wegmans, Kroger, and Whole Foods. This year, founders Jennifer and Patrick Davidson are thinking they can triple sales of their products, which have names such as Kashmir Cinnamon and Julep Mint Chip. In a bid to build on their momentum, the Davidsons are going all in, more than doubling their marketing budget and betting heavily that free samples at regional events, a highly targeted coupon program, and a magazine ad campaign can broaden PJ Madison's reach. Here's a detailed look at what the business is spending on marketing and why.
|ANNUAL REVENUE||$600,000||$2 MILLION*|
|MARKETING BUDGET AS A SHARE OF REVENUE||23 PERCENT||16 PERCENT|
|MARKETING BUDGET: THE LINE-ITEM BREAKDOWN|
|IN-STORE MERCHANDISING/ NEW-ITEM-LAUNCH COSTS||$84,000||$50,000|
|MEDIA DESIGN & PRODUCTION||$13,000||$5,000|
|COUPONS & DIRECT MAIL||$1,600||$80,000|
To land so much coveted freezer space, the company spent heavily in 2008 on in-store merchandising campaigns -- funding initial discounts as well as quarterly deals and paying some modest slotting fees. The Davidsons are now focusing on increasing sales in stores in which they already have a presence rather than expanding store count, so they won't have to spend as much on new-product-introduction costs.
For the first time, the Davidsons have the cash flow to try print advertising in a natural-foods magazine, either Natural Health or Better Nutrition. The campaign will cost $35,000 to $40,000 and will tout the benefits of their product as well as the story behind it. The Davidsons, who have two children, decided to make PJ Madison's organic after learning about the dangers of pesticide residue found in some dairy products. The Austin office of the design firm Pentagram, which designs PJ Madison's packaging, will handle the creative direction of the campaign. "We want people to say, 'I feel good about supporting them,' " Jennifer Davidson says.
Last year, PJ Madison's spent $10,000 on free samples, signage, and participation fees for a handful of events, including the Austin Ice Cream Festival, a 10-K race in Charleston, South Carolina, and a fashion show in New York City. In all three markets after these events, the company observed a nice jump in coupon redemption and sales at nearby grocers. This year, the Davidsons have earmarked nearly a third of their total marketing budget for event sponsorships. "We feel that if we can get our ice cream in people's mouths, we'll more than likely earn them as loyal customers," Jennifer Davidson says.
It may seem odd that the company is cutting back on providing free samples to grocery-store shoppers even as it sponsors road races and fashion shows. But Jennifer Davidson says in-store demos have not proved to be reliable. One supermarket in Texas sold 36 pints during a two-hour demo, but another market across town sold just five pints. Davidson thinks the problem is that most grocery-store clerks are unfamiliar with the product and are not trained to push it. PJ Madison's will pay for a sampling program only in stores that have a dedicated employee running them.
Coupons and Direct Mail
PJ Madison's will spend up to $50,000 on a coupon program designed to target prospective customers who buy competitors' ice cream or other organic products. The coupons are printed on the back of customer receipts at checkout and have higher redemption rates than those found in newspapers and circulars. In addition, the Davidsons plan to spend at least $30,000 on direct mail.