4 Tips for Setting your Marketing Budget
Knowing how much to set aside for your annual marketing budget can seem like an overwhelming task. There’s so much to take into consideration and it can often seem like there’s no good to place to start.
We’ve included our top four steps to help you effectively set your marketing budget:
1. Define and combine your strategies and plans
A marketing budget is simply an instrument to enable you to achieve your business goals. If your business and customer goals aren’t defined or clear, you will inevitably end up wasting money that could be invested in a more efficient way. For marketing to work well, you need a solid business plan.
If you don’t yet have aligned business and customer strategies, you should be working to develop these as a starting place for your marketing budget. These strategies should include measurable objectives for the coming months and years, as well as a realistic action plan for achieving them.
You will also need to create a marketing plan; this plan should be used to define your target customers and how and where you will communicate with them. In addition to this, your marketing plan should identify product positioning, customer purchase and retention journey and any competitor analysis.
2. Reviewing your current marketing spend
Your next step should be to determine what you currently spend on marketing, this should include a detailed breakdown of everything you spend to promote your business. It may be easier for you to break this down by fixed costs, things that you have to spend, vs variable costs, that you can alter, and change based on performance. Your breakdown might include some of the following:
- Digital and traditional ads
- Marketing personnel (whether in-house or external)
- Digital assets (your website, social media, content production)
- Marketing management tools (i.e., analytics services or marketing automation apps)
- Events and marketing collateral
- Sponsorship and other branding efforts
It is important to include plenty of detail, for example, making sure you break down channel spend so you can look at attributing ROI and performance metrics to specific areas.
3. Measure the effectiveness of your spend
Let’s start with the numbers, you must first understand your business’ figures and know what they mean for you. Which metrics and measurement are going to add value to your decision-making process? It’s obviously helpful if you already have the data which tells you how effective your marketing is but if you don’t, now is the time to start.
The metrics you pick should be tied to your key performance indicators. For example, if your goal is to get sign ups to your newsletter you can monitor form conversions and uncompleted forms. If you’re attending trade shows, you can track the number of orders or email leads you got at the show. We have included other metrics you might want to consider
- Profit margin: Understand how much you make for every sale and use this to calculate your net income.
- Cost per enquiry: Find out how much you spend to get 1 enquiry or sale
- Cost per sale/service: How much you need to spend to sell a service or product.
- Conversion rate: The percentage of visitors that complete a valuable action/convert compared to the total visitors
4. Optimise your efforts
One of the most basic mistakes that’s made in marketing is spending money and walking away. Sadly, a marketeer’s job is never done. Marketing plans should be built to flex, if channels are underperforming against their targets can you move the money around and reallocate it to places that are driving performance for you? You can also benchmark your spending against industry averages to see how you compare with similar businesses.
The data that represents channel performance is a great way for you to get some understanding about what may or may not be effective. One of the best ways of getting further understanding is to speak directly with your customers. Ask them how you’re doing in your product offerings, pricing and value you bring them, you can then start to optimise based on direct feedback from people who want to engage with you.