What is a marketing budget?
A marketing budget is the estimation of the amount of money you want to spend to promote your business during a period of time.
This includes the cost of activities such as an advertisement on traditional media like TV and digital media like search engines, social media, website ads, etc.
The cost that’s involved in hiring your marketing staff is also included in the budget.
In fact, Gartner found in a study that companies are now spending an average of about 12% of their revenues on marketing.
That said, prioritizing your marketing budget is critical. Here are the proven steps you need to take to prioritize your budget:
1. Where to Start: Prepare Your Budget
Before you can prioritize a budget, you need a budget. Nobody prioritizes an empty page. And bear in mind that there’s no fixed way of creating budgets.
Many times, it depends on the industry you operate, or your customers, or your business location, or the amount of money you want to spend. Thus, your budget might be entirely different from that of another company.
However, there are basic rules you should follow to make the best budget possible.
One of the things to check is your industry. For your marketing budget, you need to check the percentage of the total budget that your industry is spending on marketing.
According to a CMO survey, the average percentage of revenue industries spend on marketing is shown below.
You can start with this rule for your industry and watch your performance over time. Then you can increase or decrease it as you see fit. Likewise, marketing budgets also vary according to the type of customers you serve.
Businesses that make products for or offer services to other businesses (B2B) tend to spend a lower portion of their budget on marketing than businesses that sell products to customers (B2C).
This is understandable as B2B businesses target fewer number of people (especially corporate organizations) than B2C businesses.
After considering these factors, you can set the percentage of the total budget you want to use for marketing. Apart from this, you also have to set the budget for each marketing channel you want to exploit.
Businesses don’t put the same objectives in their marketing budget -- although elements like advertisement will always be in the marketing budget.
How much are you planning to spend on content marketing? How much are you spending on social media? Or on TV?
What about your marketing reps? All these details have to go into your marketing budget. You must specify the amount of money you’re going to spend on these channels.
2. Establish Goals
If you’re setting a budget for marketing, you’re not just trying to see how much money you can throw away. You’re marketing for a reason. Are you trying to improve your brand visibility, gain more customers, or make more sales?
Most businesses will say yes to all of these goals. But by how much? How many customers are you trying to gain with your marketing effort? How many sales are you trying to make?
You must be specific with your goals. It is difficult to be accountable with vague goals. Also, one rule of thumb is to set realistic goals. An unrealistic goal is one of the reasons marketers give up -- especially when they fail to achieve it.
In fact, according to research by CoSchedule, only 58% of marketers achieve their goals. Does this mean you don't need to set goals? No. Because marketers who set goals are 429% more likely to achieve success.
You can also review your goals later when you track your results. More importantly, make sure your realistic goals are not easy to accomplish. Why?
Because setting a goal you can achieve easily means employees don’t have to exert their creativity. You don’t want that to happen. Creating an enabling environment where your team is able to exercise their creativity is always the best.
3. Study Your Competitors
If you’re creating a budget, you should be aware that you’re not doing something out of this world. It might be more important to follow the basic rules properly rather than trying to create new rules. This is a step towards discovering your own competitive advantage.
There are some of your competitors who have been creating marketing budgets for years. How do they go about it? When you consider it, many industries don’t have the same elements in their budgets.
Some companies put sales reps’ expenses in their marketing budget while some place it in other parts of their budgets. What components do your competitors have in their marketing budget?
Through an in-depth competitive analysis of their products, Synthesis Technology, the company gained more insight into where they fit in the marketplace, as well as an opportunity to evaluate leads based on likely fit.
For your competitors that are doing well in managing their resources, you have to look at all the things they’re doing right and their shortcomings you can improve upon.
4. Invest a Percentage in Learning
When marketing, you’re communicating with potential customers. You can improve your chances of making more sales and gaining more customers if you know your potential customers better.
You have to create an ideal buyer persona. Who is your ideal customer? You need to build a profile for these persons. How old are they? How much do they earn? If you run a B2B business, what is the ideal revenue of your customer?
To have this knowledge, you have to invest in learning about your customers. This could be through surveys, quizzes, and other means.
You could also learn a lot about your customers through a customer relationship management (CRM) software.
Through research, Intuit was able to discover that their customers wanted easy-to-use tools to build their websites. With this, they were able to publicize these features and get in search engine’s top 10 for important keywords -- thus improving visibility.
5. Choose and Diversify Your Marketing Channels
There are many marketing channels today. In the past years, there used to be the traditional advertising media like TV, newspapers, billboards, etc.
But with the penetration of the Internet, there are even more options for businesses to market their products and services.
As the years go by, more businesses are marketing on digital channels than TV and other traditional channels. If you’re preparing your marketing budget, you need to ask what channels will be suitable for your product or service.
The fact that the trend is moving towards digital doesn’t mean every business has to make the same move. If you can reach your customers better with traditional media, then you should do so.
However, for both traditional and digital media, there are many channels you can exploit for marketing. You can’t use all these channels except you run a large business that generates a lot of money.
You can try channels and see how they work out for your business. Likewise, you must be flexible enough to shift strategy if a channel is not producing the results you want.
When Augean PLC decided to exploit social media and email marketing as channels, they were able to get 10% more visitors to their website as a result of this campaign.
6. Monitor Your Spend
Without a budget, it is easy to spend more than you intend to. But even with a budget, there are usually some unforeseen costs that come up during the year that you need to spend on.
Your budget should not be rigid to the extent that you can’t utilize opportunities because it’s not in your budget. But you shouldn’t be reckless either.
This is why setting your budget is only a part of the process in making your marketing efforts successful.
One of the reasons software companies like SAP and Salesforce continue to grow is because they invest in marketing and monitor everything. In 2015, SAP spent about one-quarter of its revenue on marketing while Salesforce spent almost half!
Another important part is ensuring that you follow the budget you made. When you monitor your spending, you’re able to know easily when you’re within your budget and when you’re going beyond.
With this, it is easy to curb unnecessary spendings. It is also easy to avoid encroaching into other parts of your business budget.
7. Review, Track, and Tweak
To get the best performance from your budget, you must review it to see if it is contributing to the attainment of your business’ goals. You can set intervals to do this depending on how often you want to.
Some businesses review their marketing spend and compare it to their budget monthly. Some do it quarterly and some twice in a year. When you review your budget, you’re doing it for many reasons.
One of them is that you want to know how much your business has invested in marketing during the review period. Another is that you want to track the results you have achieved with your marketing spend.
Do these results tally with the goals you set to achieve with your marketing spend? If it does, is there a way you can improve upon these results with the same marketing spend? Or get the same results with lower marketing spend?
When you review your budget, you must be able to measure your returns on investment.
According to a survey by MarketingProfs, 82% of marketing executives would like to measure returns on their campaigns. But less than half of marketers are able to measure ROI on each of the major marketing channels.
With an extensive review, you can make important changes to your budget based on the results you analyzed. These changes will enable you to get better results with your budget in the future.
Creating your marketing budget and spending it on the right channel for your business can make a lot of difference.
As a business, creating budgets is important to guide your spending.
More so, putting your budget to use in the right places is even more important as you’re not just marketing for marketing sake -- but marketing to gain more customers and meet your business’ targets.