From big and midsized companies to family-owned businesses, managing your marketing budget, allocating, and figuring out what to cover with the budget can be tricky and require a lot of foresight and planning.
Our advisors have put together a list of actions to consider to help you better understand how to make the most out of your marketing budget.
The importance of a well-balanced marketing budget
The benefits of a well-balanced marketing budget can drive awareness, boost sales and revenue, engage consumers, make tracking ROI easier, help you allocate resources, implement long-term planning, drive motivation, and more.
All companies require a marketing plan to succeed. For example, if your goal is to acquire or attract new customers, you will need to tap resources/tools to dig deeper and see consumer behaviors. You might also learn how to communicate your brand effectively, target audience, or create content (the wrong strategy can negatively impact your business). These are some of the reasons you need to prioritize budgeting.
The size of your budget will be determined by the numerous factors involved. According to Entrepreneur, new businesses spend between 12% and 20% of revenue on marketing, and established companies pay 6% to 12%. If you are B2B or B2C, your budget might also differ. The U.S Small Business Administration stated that B2B companies spend around 6.3% of revenue on marketing while B2C companies spend about 9.6% of their income. So expect to pay but also expect a good ROI.
What do marketing budgets include?
You know that not all companies are the same or have the same general budget. Some companies might include a wide range of factors into their budget and even some sales expenses that should be categorized differently. Some of the factors involved in budgeting include:
- Advertising – Creative Development, Audiovisual Production, Marketing Material
- Digital – Content Strategy, Social Media, Email Marketing, & Website Optimization
- Media Buying – Mass Media, OOH, Digital & Programmatic
- Promo Activation – Sponsorship, Donations, Promo Items & Tickets
- Public Relations – Media, Industry, Community & Employees Relations
- Other – Sales Support, Research, etc.
Setting the budget
Setting a budget can be done using these two formulas: benchmark budgets (setting aside a fixed amount of your revenue) or goal-based (marketing goals and a strategy are used to achieve the necessary goals).
- Benchmark budgets: As previously established, companies generally use 12% to 20% of their total revenue for new companies, with more established and known companies spending 5% to 15% based on their competitive position. It is important not to spend beyond what you can and don’t undercut the budget so much so that your marketing is not keeping you ahead of the competition. However, this might leave you in a vulnerable position.
According to industry experts, “The problem is that it’s not based on achieving an objective. Spending 12% of revenue on marketing every month may seem reasonable, but it may only be enough to keep up with your competitors if they’re also doing the same. It may even lead to losing market share, especially if your competitors use the following approach.”
- Goal-based budgets: Once you know your budget and costs, you can put a strategy together and calculate the expenses of every marketing factor (blogs, campaigns, etc.) to make sure your goals are attainable within your budget. You can use this formula to help you: mCPA = Total marketing cost of acquisition, conversion, or action.
Allocating the budget
Once your budget is set, you need to allocate it through every channel to maximize your marketing strategy. This step lets you decide how much you can invest in organic search, optimization, and drip campaigns. Then, you can look back to see your objectives and goals to hit all your targets. Again, you will need to look into every channel and strategy to allocate your whole budget and avoid overspending.
Some of the channels that you should probably be investing in, according to Pew Research, are YouTube, Facebook, and Instagram for advertising. With their consistent and exponential growth, spending your money on these three platforms makes more sense.
The ultimate goal of marketing investments is to drive sales and increase the brand’s visibility. A way to measure success can be by using KPIs, which will clearly show you what areas in your marketing are actually delivering results and performing exceptionally.
Budgeting is tricky, but having a well personalized and tailored budget and strategy for your business will make all the difference. You must reach all the new and adequate customers, increase sales and revenue, and achieve whatever goals you have set for your business. If you need help setting your goals and budgeting, please message one of our trusted advisors at DuartePino. A Fractional Advisor can help lead the marketing strategy, inject the client’s vision into new product development, ensure that the company’s intangible brand assets are carefully guarded, and engage a profitable customer base.
Fuel your business growth with a tech-savvy and strategic marketing plan! DuartePino helps you see the bigger picture to discover opportunities you didn’t know were possible. With a Marketing-as-a-Service approach, scale-ups and startups can focus on keeping the flame alive at the forefront of your business while our trusted advisors keep the fires burning behind the scenes. Contact one of our trusted advisors for more information.
*This blog post was written by Melanie Rodríguez Pagán, Marketing Advisor at DuartePino.