A Path to a Smart Marketing Budget for Your Business
From word of mouth to TV commercials to automated content marketing, there are seemingly endless ways for a business to get the word out about its products or services. Identifying an appropriate marketing budget for your business should be an annual practice. And if you’re just about to start a new business, it should be part of your business plan.
What percentage of your budget gets applied to marketing is completely up to you and unique to your business needs. However, here are a few steps you can take to make that decision confidently.
Assess Your Performance
This comes down to a basic marketing question: Would your business be better if more people knew about it? In many cases, the answer is yes. But you may find yourself in the enviable position of having the ideal number of customers for your product or service. If that’s the case, consider an internal marketing campaign that focuses on things like employee retention, advocacy or philanthropy.
Audit Your Current Strategy
Whether it’s a sign by the road, a post on Instagram or a new commercial, look back at your marketing tactics over the past 12-18 months. Where did you spend money (and time) and where did you see a return? Was there even a plan or was it more of an ad-hoc approach? Odds are good you have a mix of good and bad in this sort of exercise.
Define Your Opportunity(-ies)
By looking at where your marketing efforts are working, you’ll open a window to where they could do better. This is your opportunity—the prospects you think would want to buy what you’re selling if they knew about it. This could be multiple groups—each with different reasons why they make sense as an opportunity—so make a list and include your rationale. As best you can, create an estimate of what you think that audience could be worth to your bottom line. This will help you prioritize later.
Identify Your Tactics
Knowing how to reach your opportunity audiences is easier now that you’ve identified who they are. Ask yourself, “How do these people like to be reached?” This is where you’ll identify various marketing tactics: social media, radio, print, email, direct mail, billboards, etc., as well as tactics like search engine marketing (SEM) that might make sense for your business. Obviously, these tactics range greatly in cost, but completing the exercise absent of budget gives you the best view of what’s possible.
Assess the Costs
Now that you know what you could do, it’s time to put that into the context of what you can do. Looking at cost through the lens of where your best opportunities lie should provide you with the best perspective when it comes to making those final budget decisions. Compare those costs with your estimated opportunity value and it becomes even clearer.
Define Your Budget
This, hopefully, is less daunting now that you’ve gone through the previous five steps. Based on all of that information you’ve outlined, look at your overall budget for the year. Look at what’s left after necessary operating expenses and, from there, identify a number you feel comfortable labeling as a marketing budget for the year. Again, there’s no magic number that it should be X% of your budget; this should be unique to your business needs over a given timeframe. Next year, those needs will likely change and the marketing budget could change with it.
Stick to the Plan (For the Most Part)
This is often the most difficult part. Marketing needs time to work, so let your campaigns and tactics run as planned. There are certainly instances where you may need to cut a campaign or tactic short, but that should be a last resort. Think of it like an investment in the stock market: You rarely buy or sell with a daily fluctuation. Consistency is often the best practice. At the very least, you’ll learn something valuable about your audience that you didn’t know before.
The number you land on for your business’ marketing budget isn’t as important as the strategy that got you there. If your budget helps you reach your business goals, it’s a step in the right direction.