What is enough to get your brand noticed and drive conversions? How much is too much to generate a meaningful return on investment? Here’s what you should know about developing a marketing budget.
- A key element of a marketing plan is budgeting, which determines how much you have to spend on which marketing strategies.
- To develop a marketing budget, identify your goals and the optimal channels for reaching your audience.
- Marketing spend for small businesses varies wildly, from a few thousand dollars per year to thousands per month.
- This article is for entrepreneurs preparing to develop a marketing budget that will deliver results without negatively impacting the bottom line.
In order to create an effective marketing campaign, you will need to set aside a budget specifically for marketing purposes. This can be daunting for entrepreneurs who have never allocated funds towards marketing before, but luckily there are some tips in this article to help get you started. Your marketing expenses will depend on various factors, such as the size of your company and your target market. It is also important to keep track of your marketing budget so that you can see whether or not your marketing efforts are paying off. This article provides some helpful templates to use as a guide when budgeting for your marketing campaign.
Before you set your marketing budget, it is important to do your research so you know how much you should spend on marketing based on your industry, location, and goals.
What is a marketing budget?
A marketing budget is an estimate of the money a business will spend on promotional activities for its goods or services over a set period of time, usually a quarter or a year.
Your marketing budget should include all of the projects your team plans to develop in the short and long term. It should be more complete than an advertising budget, because it includes all areas of marketing, not just ad campaigns.
Why do you need a marketing budget?
Thorough research into your marketing strategy will help you avoid future problems by ensuring you set an appropriate budget and allocate the right funds per project. This will enable you to know exactly how much to allocate for staff salaries, office space, equipment, marketing communications, ad design and more.
A marketing budget will help you make sure your marketing efforts are lined up with your business goals. In addition, a marketing budget will give your team the resources they need to focus your money on the campaigns that will give you the best return on your investment.
Key elements
In order to establish a budget, you need to have a plan for how much each function will require. Having a detailed budget makes it difficult for others to say no to your proposal.
Most budgets for campaigns or strategies include media costs, creative production, agency fees, and costs for digital tools and technology. Sometimes staff costs, training, and processes are also included in the budget.
Media costs
The budget is one of the most important aspects of a digital marketing plan. You can use historical data or estimates from platforms to budget and forecast. You should prioritize the budget for the channels that will help you achieve your overall goal. For example, if your goal is to generate sales, you will put more budget into PPC than other channels. If your goal is to generate interest or consideration, you will put more budget into display or social media.
Digital marketing strategies will vary in budget and you should try to balance channel and conversion costs against your goal. Media budget can then be moved to another channel if the campaign is going well.
Creative production
After media costs, production costs will be the second largest expense when budgeting for a digital marketing campaign. Depending on the type of media chosen, you will need to produce specific creative assets, including videos, social media images, advertising banners, website image assets, email formats, and other creative outputs. These fees are for designer, account manager, and video production time, so it’s important to remember that certain media choices require creative formats to run or you can’t use them to their full potential. As a result, it’s essential to leave enough budget available after media costs to produce the creative assets to run on your media choices.
Agency fees
If an agency is managing your campaign, they will charge an hourly fee for their time. This fee is usually lower than the cost of media and production. Some agencies will charge a percentage of media spend instead of an hourly fee, but this method does not reward performance. The agency gets paid simply for spending the media, regardless of how well or poorly the campaign performs. It can be difficult to drive performance when agency fees are calculated as a percentage of media spend. Most agencies charge an hourly fee, which is a better model for driving performance.
Digital tools
There may be some digital tools required for the campaign, like ad serving tools to upload, manage, and show your image ads to your audience. These tools and any extra analytics tools usually come with a fee. If there are other tools required for the campaign, make sure you know why you need them and if they’re really worth the budget before committing to them.
Key considerations
When you’re planning your budget, the following considerations are key areas for you to evaluate:
- How many people are in your target audience?
- What are your objectives?
- How many people could you realistically make customers?
- How much money are you willing to invest in digital?
- Have you allocated budget to cover busy months or campaigns?
- Are you allocating enough ad spend?
- Are you under-investing and limiting your impact?
How to develop a marketing budget
Step 1: Identify your marketing goals.
In order to create an effective marketing budget, you need to have a clear understanding of your short-term and long-term marketing goals as part of your overall marketing strategy. Keep in mind that your ultimate goal is to increase revenue through sales, and key to that is being specific with your goals.
Marketing takes time to produce results and your goals may need to be adjusted as you work on your campaigns.
Short-term goal examples:
- Decrease website bounce rate by 5%.
- Gain 10 quality comments on social media posts per week.
- Boost brand awareness by generating 100 new social media channel followers each month.
Long-term goal examples:
- Get on the first page of Google for three of your main focus keywords.
- Create a sales funnel that generates 20% new customers consistently over the next three years.
- Develop a marketing automation flow with email marketing that saves your team five hours each week.
Step 2: Understand your target audience (buyer personas).
A persona is a model of your target audience. Having more than one persona helps you to focus your marketing efforts. If you have too many personas, it becomes difficult to focus your marketing.
These are some ways to gather data to help you develop your buyer personas:
- Survey your current customers.
- Interview people you think may be in your target audience.
- Use Google Analytics to determine audience demographics.
- Use Facebook Insights to track user interaction with your brand.
In each buyer persona, include this information:
- Location
- Age
- Marital status
- Job title
- Approximate income
- Education
- Motivations and goals
- Sources they visit for information
- What makes their life easier?
- What keeps them up at night?
- Bonus: a fictional name and photo
Step 3: Understand your market and competition.
All of this data will help you conduct market research that’s useful. To better understand your target market, you should conduct market research using primary and secondary data sources. Look at the demographics of your buyers, including their location, education level, and average income. Be aware of current trends in the economy and other areas that could affect your market, such as technology. All of this data will help you conduct market research that’s useful.
What are the top needs that your company can fulfill in the market? These won’t necessarily be needs for your specific product or service, but needs in a broader sense. Your target market, for example, may have needs such as feeling safer in their neighborhoods or saving more money.
In addition to allocating funds, market budgeting also requires investigating the competition. This means looking into who is doing well and what strategies (such as ads and marketing) they are currently using. It also means finding out how much money they are allocating to their marketing department. The type of industry can also affect how much is spent on marketing, depending on the economic sector. According to the CMO Survey, B2B companies usually spend 6.9% of their budget on marketing, while B2C companies spend 8.4%.
Step 4: Choose your marketing channels.
The best way to generate a return on the money you spend on marketing is to market where your potential customers are. There are four main categories of potential customers, so consider carefully which ones are most likely to buy your product.
- Digital marketing: These channels include social media marketing, online content marketing, automated or manual email marketing, online advertising with pay-per-click ads or social media ads (paid media), and search engine optimization.
- Inbound marketing: Some inbound marketing channels overlap with digital marketing. There’s SEO, blogs, videos on YouTube and Vimeo, e-books, and other types of content marketing.
- Outbound marketing: Sometimes outbound marketing is difficult to track, so combining it with inbound marketing is helpful. The most traceable form of outbound marketing is email marketing. Other types of outbound marketing include TV and radio advertisements, direct mail, press releases, trade shows, and promo products.
- Brand awareness campaigns:Â These channels can also overlap with the above and may include social media marketing and advertising, content marketing, public relations, and video marketing and advertising.
Now that you know which channels to use for marketing, you can create a budget. Each channel has different marketing costs. Social media advertising is usually the most affordable option.
1. Build your marketing budget by identifying your goals.
2. Base your budget on your understanding of your target audience.
3. Choose the marketing channels that will best reach your audience.
Building a budgeting plan
The next thing we’ll discuss is creating a budgeting plan. Having a budgeting plan lets you map out all your investments month by month over a set period of time. Planning ahead will ensure that your investment is secure. Without a plan, your finances will be all over the place, which will lead to your digital investments underperforming and people will start questioning them.
You could end up wasting money if you don’t plan ahead. Abrupt changes in your budget could happen if you don’t have a plan. Make sure to anticipate changes that might occur over time, like increasing or decreasing your budget during seasonal periods. For example, retailers might not realize how much extra money they need to spend during Christmas.
You can ensure that the team sticks to the budget by addressing the budget. The reflection stage begins when you try to figure out if you spent more or less in certain areas so that you can make adjustments in the future.
If you invest too much in the beginning and don’t have enough left over by the end, you won’t be able to do what you wanted to. Having a plan that allows for ups and downs will help you get better results from your digital strategy.
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