How to Create a Marketing Budget
Traversing into the world of marketing and the expenditures that come with it can be overwhelming, especially if it’s been on the backburner for your small business for some time. Display ads, banner ads, video ads, mobile ads, desktop ads, personalized ads that follow a customer across their digital footprint, programmatic advertising delivered through AI?! What about ads on local radio stations or direct mail? How do you decide what to do and how your company could afford it?
Creating a Marketing Budget
The process of developing a marketing budget for a small business and big brands can be simplified by having a clear understanding of your company’s goals and target audience. Think about it like this: if your goal is to receive more sales for a product that you know is popular among people over the age of 65, you probably don’t need to allocate very much funding for ads on Tik Tok or Instagram. Likewise, if your customers skew to a younger age range, those platforms could be an ideal source of engagement and revenue.
Though advertising can seem like an excessive spend for a small business with many other operational expenses to consider, the ROI of effective advertising is guaranteed. In simple terms, ad costs are small fees that could lead to your brand gaining a client or customer who purchases your products or services for life.
How much should my company allocate for marketing?
When it comes to budget for digital advertising and marketing campaigns, there is no “one size fits all” solution. Many brands create marketing budgets based on a percentage of revenue (between 2 and 10%). If you’re looking for an average spend to fit your company, start by researching marketing in your industry. Take a look at what channels your competitors are using, define the lifestyle and needs of your target customers, and base your budgeting on strategy.
Here’s a tip for developing marketing plans for start-ups or small businesses: start small and expand as the ROI becomes evident. Define which channels your brand is interested in advertising on and allocate dollars accordingly. Your budget should also be segmented by time periods, i.e. years, months, or quarters.
To decide on time segments, think through how your company’s revenue ebbs and flows over the year. Perhaps you have a big increase in sales around the holidays, but a slump after the new year. In that case, it would be wise to spend less in January on advertising and allocate those funds toward additional marketing efforts in November. Or, if your brand thrives during the warmer months and is slow for the rest of the year, start your big marketing pushes in Spring. (Note: You can spend more on advertising during these slower times, but it may be more effective to boost the sales you’re already guaranteed to receive.) The bottom line is that marketing expenditures become more attainable for companies of all sizes when the funds are being used strategically.
What should a marketing budget look like?
A marketing budget template should include all of the following pieces:
- Segmented time ranges. This could be a full fiscal year separated by month, quarters, weeks, or any other time period that fits your brand’s needs.
- Clearly defined channels. Include a section for each type of advertising your brand is including in the marketing plan. Content marketing, SEO, social media, paid search can all be line items within this section, for example.
- Allocated spend and actual cost. Report on what is actually spent compared to what was allocated. This allows marketers to understand how their campaigns are pacing and to re-allocate unused funds into different marketing channels. Keeping track of advertising costs based on specific marketing strategies as line items is essential for reporting high-level data to prove the ROI of campaigns and adjust for future campaigns.