How to Develop An Effective Marketing Budget

If you want to grow your business and make solid investments for the future, you need a marketing budget to support your plans. 

An effective marketing budget stops the random acts of marketing and provides the flexible framework to plan, prioritize, and adjust. By aligning marketing expenses with business goals you’ll simplify decision making and eliminate reactive and high-risk tactics. 

Get started by setting a total marketing budget amount.

How to Set Your Marketing Budget

You might have heard that you should allocate 10% of company revenues for marketing. This is a good starting place. Research by the CMO Survey in 2020 shows marketing budgets at an all-time high, both as a percent of firm budgets (12.6%) and firm revenues (11.4%). If you can’t afford to allocate 10% on marketing, pick a place to start.

Another approach is to set the marketing budget as a percentage of each business goal, for example if you are launching a product set a goal for launch expenses including marketing.

 In a zero-based budget, expenses are included as they are approved. A zero-based budget requires detailed planning and management to avoid reactive decision making. 

As you’re planning the total marketing budget amount, consider how you will measure marketing success, for example, increased sales or website traffic. The return on investment (ROI) of marketing may be hard to measure, but it’s essential to validate your strategies and performance. 

Now, let’s consider the potential line item expenses to include in your marketing budget.

What to Include in Your Marketing Budget?

Take a look at the categories and details below. Some of the line items listed are direct outlays, e.g., a subscription, others will help you estimate resources needed using staff time, or external vendors.

 Website

• Setting up a new website

• Hosting

• Content Development (copy, photography, graphics, video)

• Search Engine Optimization (SEO)

• Maintenance & Improvements

• Developer for technical issues

• Set up metrics and tracking, e.g., Google Analytics

Social Media

• Initial social platform set-up

• Content Development (copy, photography, graphics, video)

• Ads 

  • Ad spend (e.g., cost per click)

  • Set-up and management

• Engaging on social accounts

Branding & Collateral

• Brand development: logo, brand strategy

• Business card design & printing

• Brochure design & printing

• Envelopes, Letterhead design & printing

• Other printed materials including promotional items, e.g., pens, stickers, posters

• Internal/external signage

Google

• Google My Business (GMB)

  • Set-up

  • Posting of content/photos, answering questions, responding to reviews

• Content development (copy, photography, graphics, video)

• Google Ads

  • Ad spend (e.g., cost per click)

  • Set-up and management

Email

• Tool subscription (e.g., Mail Chimp, Constant Contact)

• Set up email tool

• Capture/collect email addresses

• Purchase data/list

• Content development (copy, photography, graphics, video)

Offers

• Discounts, coupons, free with purchase offers

• Content development (copy, photography, graphics, video)

Customer Relationship Management: tracking responses, leads, purchases, and other customer communications

• Tool subscription

• Set-up, maintenance, data entry

More Expenses to Consider

• Ecommerce payment processer

• Print ads

• Partnerships, e.g., community events

• Direct mail (including, list, production, postage)

• Events, e.g., trade show, customer appreciation

• Training/conferences

• Listings/Directories/Links

• Organization memberships, e.g., Chamber of Commerce, industry organizations

• Pre-sale expenses, e.g., gifts, meals, travel

• Webinar/conference call tools

• Other marketing tools, e.g., design tools, stock photography, etc.

• Public relations

• Equipment, e.g., color printer, ink, camera, video lighting

Select the elements you need and estimate the amount for each item. While building out the budget will take some time, once you’ve got a working budget you have a powerful tool. Do you have enough in the marketing budget to support the business priorities? The budget planning might lead to a reprioritization of the business goals once the cost to support those goals is better understood. 

What gets in the way of an effective marketing budget? Check out three common pitfalls.

3 Marketing Budget Pitfalls 

1.     On & Off: Stop and start marketing is a waste of resources. Marketing helps you build a pipeline of potential customers. When you stop marketing, the pipeline is shut off and you lose your investment in those customers. Instead, modify the tactics that are not working, and don’t stop marketing.

2.     One-time: Be careful labelling an expense as a one-time outlay without considering maintenance, and potential new features. For example, you’ll only build a new website once every few years, but you’ll need to update the content and search engine optimization regularly.

3.     Underestimating: If you want to grow your business by increasing sales, expanding your territory, or adding online options, you’ll need marketing funds to support those goals. Do expense and revenue projections for each new initiative, and don’t forget the marketing. 

 Review & Adjust the Budget

Finally, the usefulness of your budget depends on regular reviews and adjustment. Take a quick look monthly, with more detailed quarterly reviews. The purpose of each review is to gauge your current spending versus the budget and the impact of the investments on marketing and business results. Make adjustments as necessary to optimize results, but be careful not to turn off tactics that are feeding your pipeline.

An effective marketing budget helps you achieve your goals. Wherever you are in the process of developing your marketing plans, I’m here to help.