Does your company know how to build and use a marketing budget? Most don’t. Most wait to see what they need, then react. Why do we budget for other things, but not for generating new business?
When I ask my prospects about a marketing budget, most of them tell they ‘kind of’ have and use a budget. When it comes down to it, they spend money on marketing so that means they have a budget, but they don’t really take the time to plan out what they need or what they are going to do with their budget.
But what exactly should you put in your budget?
There are a lot of things that should be part of your marketing budget. Take a look at the list below for several examples.
Campaign Development: creation of content, graphic design, creation of landing pages, follow up to all of the aforementioned, and measurement of effectiveness of all of the above.
Promotional Channels: advertising, promotions, press releases, writing, speaking, and referral strategies.
Audience Engagement: social media, engagement, blogging, email marketing, and website updates.
Credibility Elements: reviews, testimonials, case studies, submissions for awards, ebooks and other books.
While some of these elements may not be relevant to your business or there may be additional items needed depending upon the nature of your company. Spend money on the tactics that are relevant to where your ideal client hangs out.
Another category that differs vastly by industry is sales, and you may want to consider what sorts of elements you would need to fit in your marketing budget by way of sales. But don’t forget about it, because sales is likely among the most important categories in your marketing budget planning. For instance, you may need to budget some money for the development of packaging, or for cross- or up-selling promotions.
Now that we’ve established what kinds of things ought to be in a marketing budget, let’s talk about what should be considered when creating your marketing budget.
How to Build a Marketing Budget
Here are three different methods that can be used to determine what you’re marketing budget should look like and how much money should be in your budget.
1. Percentage of sales. This is a great way to determine exactly how much you can afford to devote to marketing, because then you can be absolutely certain that you’re not spending more than you’re making. Often companies will devote somewhere between 5% and 10% of their sales toward marketing. However, if your company is just starting out, that number may be larger or smaller, depending on what you can afford.
2. Last year’s budget. Take a look at exactly how much you spent last year on marketing – down to the penny – and determine how effective your efforts were. If they were highly effective, consider bringing the amount you spend on marketing down slightly. If they were ineffective, consider increasing your marketing budget. Always remember to take into account your revenues when planning your marketing budget from this angle.
3. Allocate a percentage of monthly sales. This makes a lot of sense for companies that may have seasonal highs and lows. For instance, if your company sells Christmas sweaters, obviously you probably won’t be doing a lot of marketing in July, but you will be doing most of it in November and December. One challenge with this can be staying ahead of the curve. So, if you are like the Christmas sweater company, be sure to spend enough ahead of time to ensure that you will have a successful season. Don’t wait until Thanksgiving to get the ball rolling, plan ahead to set everything up for the high season.
Regardless of which strategy you choose, be sure to build a marketing budget that is realistic. Be smart and research which elements of marketing will be most effective within your industry. And have an understanding as to what the cost per lead should be for your industry. Also understanding the long-term value of a new client can also put some perspective around how much you might spend to generate each lead.
A marketing budget is one of the most important elements of a business, and yet so few companies take the time to evaluate and build it into their business. If you take the time to be smart and realistic about developing a marketing budget, you can see great returns on your investment. So don’t wait any longer – start planning your budget for marketing today.