How to Set a Marketing Budget
Updated: Aug 14, 2019
When it comes to creating a marketing budget, many small businesses find themselves feeling lost or unsure of where to begin. Knowing how to allocate your resources can be challenging. Unfortunately, this tends to cause businesses to have an underdeveloped or even a non-existent marketing plan. This can be detrimental to the success of an organization, as marketing is a crucial and necessary component of any business strategy. To avoid this happening to your business, we will be discussing a few simple steps to help you implement a successful marketing budget and watch your business thrive!
GET TO KNOW YOUR SALES
At the very basics of every marketing budget lies one question: What do your sales look like? This includes past sales, current sales, and future anticipated sales. You’ll need to track how your customers move through the sales cycle - from prospect to customer. This can easily be identified through data from your website, sales platform, or customer relationship management software. Some of the key metrics you’ll want to focus on are number of website visits per month, number of leads per month, the cost of generating these leads (web development, content creation, etc.), number of leads that convert into sales, and the average value generated by that sale.
Getting to know your sales and the way your customers move through the sales funnel will give you great insight into how your customers are finding your business, leading you to understand how to sort out the allocation of resources for your marketing budget.
GET TO KNOW YOUR CURRENT COSTS
In addition to knowing your sales, it is equally important to identify your costs. Past costs and current costs are important in this step, but we want to focus mainly on what you think it will cost to reach your current and prospective customers. In addition to paying your employees, will you be incurring any extra costs by asking your employees to perform supplementary marketing tasks? How much would it cost for you to hire an outside marketing agency? Keep in mind that hiring a firm will have higher upfront costs, but it will be tremendously helpful in getting your marketing plan off the ground. Lastly, ask yourself, what are the potential costs if you don’t do anything? Will you lose any sales? Will there be a sudden change in technology or the marketplace that will cause your business to lose market share?
Becoming familiar with your costs is one more crucial step in formatting your marketing budget. This will likely be ever-changing, so be sure to revisit your costs regularly and adjust your strategy as needed.
What exactly do you wish to accomplish by setting a marketing budget? Perhaps you’d like to see an increase in sales or maybe you want to build a reputation in your community. Regardless of what it is you want to achieve, it is imperative to set specific and measurable goals in order to help you move toward attaining your goals. To help create clear-cut objectives for your business, break this down into time chunks - what do you want to achieve next quarter? What about next year or 2-3 years out?
According to forbes.com “It’s common for small businesses with revenues less than $5 million to allocate 7-8% of their revenues to marketing, splitting that between brand development costs such as websites, blogs, sales collateral, and promotion costs, as well as campaigns, advertising, and events. Never base your marketing budget simply on what’s left over after covering all other expenses.”
MARKETING IS AN INVESTMENT
It is so important to keep in mind that marketing is an investment, not a cost. In large organizations, it’s common for the marketing plan to be determined by the top, where marketing is usually seen as a cost rather than an investment. This way of thinking leaves organizations stuck in the past, as these decisions are usually made based on past costs only. In order to create a dynamic and successful marketing budget, you will need to consider all aforementioned aspects to create a plan that’s bound for victory and invest wisely into your marketing campaigns.
CLASSIFY GROWTH STAGE
The growth stage of your business is another key component to consider when forming your marketing budget. Growth mode refers to companies that have bridged the gap between startup and scale-up and are taking definitive steps to expand their operation. If your business is in growth mode, you’ll need to generate revenue at a more rapid rate. Because of this, consider investing into your marketing efforts that are already in place, such as further web development and maintenance.
Planning mode, on the other hand, is a stage in a firm’s development where strategies are formulated through a comprehensive process by the top members of the organization. Businesses who are in planning mode should be more focused on steady growth and will want to focus more on long-term marketing strategies. The most cost effective way to accomplish this is by taking steps toward SEO through internal blog writing, content creation, and website optimization.
GET TO KNOW CURRENT AND FUTURE MARKETING TRENDS
To form a successful marketing budget, you’ll need to dive into current marketing trends, as well as future trends to come. Getting to know these trends will help you maneuver through the budgeting process. It’s important to pay close attention to changing technology and apply that to your marketing plan to keep up with changes in the industry. Take advantage of social media insights features, email marketing analytics, and website data. Additionally, there is a huge and always-increasing bank of blogs, articles and videos about marketing trends. These resources can be used to stay abreast of current and future trends and use those insights to help you develop your marketing budget.
At first thought, setting a marketing budget is a daunting task. With the proper steps and planning, your business can develop a dynamic marketing plan to set your business up for success. In addition to helping create a marketing budget, understanding the components mentioned above also helps you to understand the ins and outs of your business, which is valuable beyond measure.
If your business is struggling to set a marketing budget, let JanMar Agency help! We have assisted hundreds of businesses just like yours navigate the intimidating waters of creating a marketing plan.