So see a limited amount of money and a lot you want to do with it. So what do you do instead of marketing budget? So here’s what we’ll cover today. What’s in a marketing budget? Channeling traditional marketing spend in the digital marketing, why budget matters, things to think about before determining the budget and how to determine the marketing budget.
So what should be in a marketing budget? When putting together a marketing budget, we should consider all activities that we’re undertaking to market the business. This can be fixed operational costs such as marketing, salaries, website costs, agency and consultant fees, advertising expenses, membership fees, software costs, continuing education, among other things, channeling traditional marketing. Spend it to digital marketing. There’s a case to be made that traditional marketing spend can often be more effectively channeled into digital marketing spend. The problem with TV, radio, print and other traditional efforts is that it can often be extremely passive, highly expensive and difficult to track the results of the campaign. The benefit of digital marketing is you have the ability to better target high content potential customers, track every effort to revenue and traditionally have a much lower CPA compared to traditional channels. We always recommend looking into average CPA or CPA data for digital marketing in your industry and comparing that to your existing acquisition numbers and continuing to invest in digital. As long as you’re seeing that profitable CPA, being able to consistently track the success of the spending will increase the probability of reinvestment and allow for the ability to grow the prioritization of the marketing team. So why is having a marketing budget important? It’s important to have a budget because it allows you to set benchmarks and goals against a budgetary outlay.
You’re able to set business expectations for what will be allocated toward marketing and have a strong understanding of what types of revenue will need to be driven against that budget for those marketing efforts to make sense. From there, you’re able to continuously optimize any marketing efforts to maximize the allocation of that budget in hopes of seeing the best results when multiple stakeholders are involved by agreeing upon a budget. It allows you to have a longer term perspective for marketing efforts versus having to start and stop campaigns and having to continue to fight for additional marketing spend before you put together a marketing budget. It’s important to consider a handful of factors. What team members are involved in the decision making process and how will they be impacted by the marketing efforts? What are my company goals for this year, whether that’s revenue sales growth percentage? Who are my competitors and what are they doing? Well, that I’d like to do as well, if not better, and have a clear understanding of your target market and your specific sales funnel to determine the channels and strategies that will make the most sense for everyone and then ensure everyone is on the same page for how the marketing campaign will be measured for success, whether it’s brand equity, your sales, customer impressions company to growth, you get the point where a handful of ways to define the overall marketing budget.
One way would be to simply develop a marketing budget based on percentage of revenue. New businesses should often plan on allocating about 15 to 20 percent of their overall revenue to those marketing expenditures. And once the business begins to get a little more established and build a team related to marketing allocation, about 10 percent is typically a fairly healthy range. Another way would be simply competition matching. What am I seeing that my competitors are doing? Are they always at the same trade show every year? Are they consistently spending on Google advertising that look like they’re doing a ton of blogging and are active in social media? And what do I believe I need to spend to stay on pace with them? In our opinion, the best way to determine a marketing budget would be to keep it goals driven. Ideally, we’d have some information about what our target cost per customer would be and how many customers you need to require as a result of your marketing efforts. From there, it could be a simple formula if your target cost for acquisition is about three hundred dollars per customer and you want to add two hundred new ones, then you should plan on allocating about sixty thousand dollars toward those marketing efforts. In addition, of course, you need to add any fixed cost to this number to really determine the budget.
But the great thing about this method is you can track all of your efforts against those customer goals as well as that target cost for acquisition to really determine the efforts that are being the most effective for you. In conclusion, we hope that you feel ready to put together your budget.