Developing A Marketing Budget
Ah, it’s that time of year again. Some say it’s the most wonderful time. Others hear the screaming inside their own head to meet deadlines and budgets for year-end.
Either way, it’s time to consider planning for the new year, and that means looking at finance and budgets.
Creating a marketing budget may be one of the most important steps you make for your company. Marketing is the tool you have to showcase what your company has to offer to the world, build your brand, and keep the message about your business positive. Oh, and there’s that whole, “bring in more business” function as well.
The process of creating a budget often leads to more questions than answers, but that’s all part of the process. Questions like: How much should you spend on marketing your business? There’s no right or wrong answer, but there are definitely some helpful guidelines and suggestions out there.
Why Bother Developing a Marketing Budget at All?
Like budgeting for any other component of your business, creating a marketing budget could be a very important tool for your company because it keeps your spending in check while ensuring you’re consistently working on building a new business. It is a core component of your business expenses.
Without a budget, you may be tempted to keep throwing money at various plans and strategies and hope that it does enough work. Of course, doing that may lead to overspending and damaging your bottom line.
If you don’t have a budget, you also don’t have a way of ensuring you are continuing to invest wisely in your business. In fact, when it comes time to cut costs, you should be increasing your market budget, not reducing it. The reason is simple – to stay open and to grow your company, you need more people to know about it.
That’s one of the biggest mistakes companies make during down times- they cut marketing. That’s an effective strategy if your business has high brand awareness, but unless you’re Apple, Coke, or McDonald’s, cutting your marketing expenses can speed up the decline of your business.
It’s About The ROI
On the other hand, having a huge marketing budget does not mean you’re going to have a lot of success or see endless leads. Rather, it’s about the return on investment you get. That is, the money you put into your marketing must come back to you in increased revenue. If you put $10,000 into a marketing budget and see sales rise by $15,000, that’s positive.
When it comes to determining how much to invest in a marketing budget, then, consider a few things:
- Where are your target customers? How will you reach them?
- How much of an improvement in sales do you want?
- What amount of brand recognition is for your business right now?
- What is your competition doing?
- What level is safe for you to start with?
It is often difficult to create a marketing budget like this without a lot of experience or really any clue what it costs to do this type of work (or at least some heavy research).
That’s where working with a digital marketing company can help you. This is one of the best ways for you to learn more about the options that fit your needs. You can create a budget, and you can tap your spending, but getting accurate quotes for proven marketing strategies is very important here.
The Main Steps in Setting Up a Marketing Budget
There’s quite a bit to consider when building a marketing budget. Here are some steps to help you through this process.
Determine what your marketing goals are
Your first step is to know what your goals are. Create some specific short- and long-term goals called key performance indicators (KPIs) that are important to your business.
Be specific here. For example:
- Increase sales by 10% from the same time last year
- Build your social media marketing to reach 10,000 new followers.
- Reduce your website’s bounce rate by 5% over the next three months.
- Increase leads by 10% through website traffic increases.
Your long-term goals may be to build brand recognition, rank on the first page of Google, or achieve other strategies, like building a strong following on your YouTube channel.
Define your target audience
To be successful with your marketing budget, you have to know where your customers are. To do that, you must define who the ideal customer for your business is. That’s not as hard to do as you think.
Spend some time learning about the demographics of your existing or previous client base. Use surveys to help you. Then, use Google Analytics to support you as you better define your audience demographics. The key here is to get an idea of who is your ideal customer based on factors like earnings, age, gender, and so on.
What’s most important about this is understanding where they are online and how to get your business in front of the very people that need you. For example, your customers may be women in their 50s who are homeowners. You know this because you’ve done the research to document the details.
Learn about your competition
Who is your competition? Look at both local and online factors. Who is ranking on the first page of Google? When you learn more about who the competition is, you can then get an idea of what they are doing to bring in customers.
Learn about your customers and market
Next, gather information about the factors that impact a buyer’s decision to buy your product or service. Are economic factors a big part of their decision? Do they need your product to solve their problem? Is there a seasonal aspect to your business that you need to adjust your marketing for? Consider as many factors as you can about your industry and it would help to do a SWOT analysis (Strengths, Weaknesses, Opportunities & Threats).
Develop a Plan to Achieve Your Goals
The biggest part of your marketing budget is to create a plan to achieve your goals – reaching your customers and clients through a variety of advertising campaigns and marketing tools. Don’t define what you will spend money on until you’ve done the rest of the work, though. You want to be sure that if you develop a Facebook campaign, that’s where your customers are.
Work with your digital marketing team to help you to define the types of marketing methods best suited for you. Here are some examples:
- Digital marketing: Most companies will want to focus on digital marketing because it provides some high-value, long-term results. It starts with having a modern, updated website (old websites just move your customers to your competitors). Look at your social media marketing, automated email marketing, online advertising, and content marketing. It also includes search engine optimization (SEO).
- Outbound marketing: This method is more challenging overall, but it involves the use of email marketing, TV and radio advertising, and direct mail marketing. It may also include promotional products.
- Inbound marketing: This method includes using some elements of SEO blogs, YouTube videos, ebooks, lead magnets, and other valuable tools that encourage people to reach out and buy from you.
Most companies will benefit from a combination of marketing methods. As you build your marketing budget, your digital marketing team will work with you to identify which areas are most important to your business based on data and analysis.
A Common Rule Of Thumb About Budgeting
Depending on your industry, many experts recommend that you use your annual revenue as a beginning measurement for budgeting. Depending upon the stage of growth of your business, your company size, and the industry that you’re in, your marketing budget should be somewhere between 5%-25% of your annual revenue as a general rule of thumb.
It’s not uncommon at all for companies to have a marketing budget of around 8%-10% of their annual revenue.
Where Are Companies Planning To Spend Their Money Right In 2023?
A recent study by Neil Patel surveyed over 8000 marketers across many different industries to discover how they planned on spending their budgets next year. Here is a summary of the findings:
- 68% planned on increasing their SEO budget
- 58% planned on increasing or maintaining their social media budget
- 83% planned on increasing their budget for content creation
- 62% will increase their budget on conversion rate optimization
- 92% planned on increasing their advertising on podcasting
- 59% will increase their budget on Google Ads
This gives a pretty good outlook on digital marketing spending for the coming year.
Let Our Team Help You at Make It Loud
As a website design and marketing firm, we have the years of experience it takes to help you to market your business successfully while keeping costs in line with your goals. Let us provide you with a quote for the services you are considering to ensure you know what to expect.
Cliff Tillery, MBA is the Chief Operating Officer at Make It Loud which is a digital marketing firm located outside of Atlanta Georgia. He is also the Director of SEO. More than 14 years ago, he started search engine optimization at this agency and has taught digital marketing skills to business owners at the Gwinnett Chamber of Commerce, the Gwinnett Entrepreneur Center and other groups.