Defining the budget is integral to ensuring the success of your marketing campaign. The funds you allocate for your marketing efforts can depend on many factors, including your industry, company size, goals, tactics, buyer personas, and previous marketing experience.
While there isn't a clear rule of thumb that allows you to determine the marketing budget, you can implement best practices that apply to your business.
Let’s take a closer look at effective guidelines that can help you produce a realistic marketing budget.
Set Clear Marketing Objectives
When you are developing your marketing plan, objectives are among the first things you consider. The same works for the budget. The type of goals you want to achieve dictates the budget you need for the tactics to be successful.
For example, if your goal is to lead the generation, you may decide to spend more money on paid advertising. Meanwhile, if you want to increase the retention rate, you might have to invest more money in email marketing.
The size of the budget also depends on the date span of your campaign. For example, an annual marketing plan requires a larger budget than a quarterly plan.
Analyze Past Performance
Your past marketing activities and their success or failure can provide valuable insight into how much money you are likely to spend in the future. Figure out which strategies were highly successful in the past and consider allocating a higher percentage of your budget to them.
If you don't have a marketing history or cannot glean clear data from past experiences, you can take a closer look at whatever usually works for your direct competition.
Know Your Target Audience
The type of audience you want to attract determines the channels that help guide it down the sales funnel. These channels, in turn, require different investments.
If your audience prefers social media interactions, you must allocate a higher budget to SMM. Meanwhile, if it responds better to email communication, you must focus the money on email marketing.
Conduct market research and review industry blogs and resources to determine the best ways to engage your audience. Then you can understand how much relevant tactics are likely to cost.
Research Industry Benchmarks
While each business is unique, industry benchmarks for marketing budgets can help you get an idea of the budget range. You can utilize blogs, market research, and competitive analysis to come up with approximate figures.
Consider the Customer Acquisition Cost (CAC)
The customer acquisition cost (CAC) is the average amount you spend on acquiring one customer. Marketing efforts are part of this expense. By evaluating CAC in the context of your ROI goals, you can figure out how much is reasonable to spend on marketing.
If the CAC is too high, you may want to review your marketing strategy and switch to less expensive tactics.
Set Percentage Revenue
A common approach to determining the budget is considering which percentage of the annual revenue to spend on marketing. This percentage may depend on many factors, including your industry, past experience, and company growth stage. However, some general benchmarks exist.
For example, a recent Gartner survey demonstrates that companies across multiple industries spend from 6.4% to 9.5% of their revenue on marketing.
Prioritize Marketing Channels
When developing your marketing plan, you need to identify the channels that help you achieve your goals and have the highest ROI for your business. These channels usually include content marketing, search engine optimization, email marketing, paid ads, and more.
If you have a marketing history, you can decide which channels warrant a larger budget. If you are just starting out, check which channels work best for the competition.
Consider Seasonality and Industry Trends
If your business depends on seasonal difficulties, you must factor them into your marketing budget. Meanwhile, industry trends, market shifts, and economic fluctuations should also affect the final figure.
To understand how these elements can change your budget, you need to conduct research, follow industry trends, and monitor economy-related predictions.
Monitor and Measure Results
When determining your market budget, you need to implement comprehensive tracking and analytics practices that help determine your campaign's ROI. As you are tracking metrics and KPI’s (key performance indicators) described in your marketing goals, you may find that they need adjustment.
Changes to marketing tactics can also affect your budget. You need to plan for the possibility of rerouting the budget you allocated for specific tactics to a more successful marketing effort.
While jumping from tactic to tactic may seem effective, make sure that your efforts remain consistent. Otherwise, you could hurt the campaign by confusing the audience.
Flexibility for Experimentation
The marketing budget must remain flexible to give you a chance to make changes in real-time. Consider reserving a portion of your budget for testing new strategies and tactics.
Don't let a lack of money keep you from innovative techniques and opportunities to steal market share. All these tactics can't be at the expense of the overall campaign, so you need a so-called emergency fund.
Setting a Realistic Marketing Budget
Designing a strategic marketing campaign with a realistic budget is just as important as leveraging flexible strategies that achieve quick results. Your budget is a big part of the framework that allows you to achieve your marketing goals.
Setting a realistic marketing budget is a complex process that requires extensive research and analytics.
At Mid-West Family Springfield, we have a team of marketing experts who are always available to share their budget-building experience. For more information, please contact us today!
