“The hardest thing about getting publicity is doing so on a budget.”
You know your business has value to offer its client base only if you could identify and reach out to them, right?
Thankfully, that’s not the most challenging part – top digital marketing service providers are waiting to give your brand the exposure it needs.
However, partnering with such services would be a tragedy only to discover that you don’t have enough capital to pull off your ambitious goals. Welcome to the competitive world of “marketing on a budget.” While this is indeed tough, it’s nearly impossible without a budget plan in the first place.
The truth is that all forms of marketing – email, social media, direct mail, etc. – have an actual and opportunity cost attached. Since nothing’s really free, marketing without a budget is a lot like ‘hitchhiking gone wrong.’
It’s possible that the ride you were hoping for never shows up, and if it does, you might get dropped off a few miles north of your desired destination. When there are specific timelines and goals to achieve, you simply require your own car.
Keep reading to understand how free media is borrowed and how a clear marketing budget is the only way to succeed in 2023.
Usually planned and prepared on an annual or quarterly basis, a marketing budget is a clear and detailed breakdown of how a company intends to allocate its resources to marketing. The general rule of thumb for B2B businesses is to reserve at least 2 to 5% of their total budget on promotional activities – lead generation, brand awareness, demand generation, etc.
B2C businesses may need to allocate a greater percentage – 10 to 12% – toward advertising their products and services.
Interestingly, a marketing budget is not something a company’s owner sits down and prepares on a whim. There are different parties involved in its development, such as –
- The Executive and Finance Department – The executives sitting on top-level management and the finance heads will scrutinize sales projections and profit expectations to come up with a budget allocation.
- Marketing Leaders – Every company’s sales and marketing teams have S.M.A.R.T goals to achieve for the quarter and year. They will also propose a budget based on estimated spending.
- Program Leaders – The third party involved are program leaders, such as social media managers or digital marketing heads, who will assess the entire marketing plan (with a bird’s eye view) and provide a budget plan based on their estimates.
The proposed budgets by the three parties will be combined, and the stakeholders will prepare a final budget plan. An ambitious budget plan that aims at vying for a higher amount in the future must monitor spending and subsequent ROIs.
What Does a Marketing Budget Entail?
This is generally dependent upon the business. Each business may incorporate a mix of marketing mediums to reach its target audience effectively. All in all, these efforts would include (but not be limited to) –
- PPC ad campaigns
- Building backlinks
- Social media advertisements
- Personalized email marketing offers
- Strategic content creation for effective content marketing
- Offline media such as print, direct mail packages, and other conventional channels
- Television or radio campaigns
- Automation tools and other software needed to amplify marketing efforts
As to the complexity and size of the budget plan, it all depends upon your business and its operations. For instance – small companies can manage with simpler marketing budget plans. Their needs could be fewer with a mix of social media content marketing, email offers, and telecast follow-ups.
Enterprise-level organizations typically involve more complex sales cadences. There are multiple departments to consider, and each department will have its specific goals and budget. The marketing budget will be more intricate, complex, and detailed in this case.
What's the Need for a Marketing Budget?
As mentioned earlier, no form of marketing is ever actually free. The exception may be happy customers. As in the case of Lego, brand advocates can significantly cut down marketing costs for your business due to referrals and word-of-mouth, but the same ties back to investing in proactive and meaningful brand-customer communications (which roots back in marketing).
Best be assured, major costs will be involved in the initial stages. Gradually, your marketing budget will diversify (and costs will reduce) as loyal customers sit behind the wheel, steering your brand toward qualified prospects. Plus, many of the activities that form a part of marketing are the ‘pay once, profit forever (or at least a long time)’ kind of tasks.
Some examples could be website development, creation, repurposing of thought leadership content, publishing e-Books, etc. That was simply the gist of why a marketing budget becomes important for your business. Let’s delve a bit deeper into it –
You Have a Concrete Picture of What Can be Spent
With a marketing budget, you can tell your money where to go instead of wondering where it went; this is perhaps the most crucial reason to develop one.
Consider this example – Let’s say you’re a SaaS company that offers its customers services on a subscription or package basis. The average LTV of each customer amounts to $3000. You suggest your sales and marketing teams focus aggressively on lead generation for the month, but they have no actual budget they’re looking at.
It’s the usual review time at the end of the month when you’re happy to discover that 100 new customers signed up for your SaaS services last month, and the costs only amounted to $200,000. The loopholes start showing up as the veil gradually lifts – the revenue generated from each customer is just $1000, and you just spent $200,000 to make $100,000! The results? Payroll for the upcoming week is delayed. This can easily be avoided with a clear marketing budget.
You Can Prioritize the Budget Effectively
As it’s said, being spoilt for options often leads us to focus on all the wrong ones. In any case, no business can be a Jack and master of all trades simultaneously. Nor will each marketing channel hold the same growth potential.
When a clear marketing budget is prepared, you are forced to prioritize. This way, more resources can be allocated toward the most profitable channels, while other channels can receive a share to lesser degrees.
Another corollary benefit of this would be setting near-accurate benchmarks. Your expectations from each marketing channel will be realistic, as you’ll understand the revenue you can expect from each. Prioritizing the budget effectively is crucial to gain a long-term marketing perspective.
You’re Strategically Investing in Business Growth
A lot of brands make the mistake of looking at marketing as a mere expenditure, when it’s actually an investment. Sometimes, all it takes is a change of perspective to make the most of current opportunities.
When you look at marketing as an investment in your business’ future, you strive for strategic ways to make the most of the marketing budget. This could involve setting definite goals instead of vague ones, tracking ROI more closely, going into ‘growth mode’ (which means enduring short-term losses to see unprecedented long-term growth), etc.
This way, the marketing budget in itself becomes a means to maximize its utility in the long run. While others are creating vicious cycles, you’ll create a self-perpetuating cycle for growth!
Common Ways to Prepare a Marketing Budget
In general, there are two main ways to prepare a marketing budget, as discussed below.
This form of budgeting allocates resources for the current year based on a benchmark number. It is also known as a bottom-up budget. This is less time-consuming and a safe way to approach marketing budget planning.
However, one main problem with this budget is that it does not adequately consider your business’ growth targets, marketing goals, etc. This budget is comparable to a marathon runner who practices for a race by running 10 miles (ca. 16 km) weekly. Will it be enough to win the race? Only the day of the race will reveal – risky!
Example for Benchmark Budget
Here are some examples of how a benchmark budget may be prepared –
- Profit-first budgeting approach – 10% of the revenue after deducting expenses
- Fixing a set amount for every year, quarter, or month
- 12% of the revenue generated in the previous quarter, etc.
Zero-Based Marketing Budget
This method of preparing a marketing budget is all about starting from the ground up or scratch. Also known as a top-down budget, it is developed by keeping the budget well-aligned with the organization’s goals and strategies. Since this budget planning begins from the zero base, all components must be justified in each stage of the budgeting period.
It is the opposite of the traditional budgeting method, wherein conclusions are drawn from the previous year’s budget. For instance – a 5% increase is to be allocated toward email marketing expenses compared to the past year. Naturally, this is a more time-consuming budgeting process.
The steps involved in this budgeting method include –
- Starting from ground level (zero base)
- Identifying specific business targets and requirements
- Road mapping the targets and determining different methods for achieving each target. This step also includes justifying each element of the budget.
- Scrutinizing each identified method and looking for alternative methods as a backup cushion for achieving targets
- Setting final budget numbers and releasing the new budget plan. Finally, communicating the budget clearly to all necessary departments involved
Example for Zero-Based Budgeting
Consider the example of Mondelez, a US-based snack manufacturer. This company mainly adopted the zero-based budgeting approach to prioritize marketing expenses around its most profitable brands.
The company outsourced the services of Accenture to implement numerous cost-control budgeting mechanisms. This was done to make productivity savings over the upcoming three years. The savings helped Mondelez increase its spending on power brands and high-performing marketing campaigns.
Within just one year of zero-based budgeting, the company’s market share rose steadily, and its power brands grew by 5%.
Simple Steps to Create a Marketing Budget
Now, let’s arrive at the most critical question this guide has to answer – how to prepare a marketing budget. There will be a number of steps involved, since preparing a marketing budget is not just about allocating dollars toward different campaigns and channels. Let’s look into them in detail.
Identify Marketing Goals
This can also mean looking at the big picture and dissecting it to short-term and long-term goals. Boosting sales is only possible when the marketing goals are highly specific. Before we jump into some examples, remember that your goals are subject to changes based on campaign results.
Short-Term Goal Examples
- Gather 10 quality customer reviews across social media platforms
- Improve demand generation by securing at least 100 new followers on social media every month
- Reduce website bounce rate by 7%
- Have your brand appear on Google’s first page of search results for three high-impact keywords
- Build an actionable sales pipeline that can create at least 25% more customers over the next five years consistently
- Automate email marketing campaigns in a way that your internal team saves at least three hours each week
Know Your Target Audience Intimately
Once personal goals are set, now comes the time to explore the potential for growth by assessing your target audience. Ideal buyer personas help you zero in on leads with similar characteristics or buying patterns.
Though not everyone is indeed your customer, developing too many buyer personas will only be counter-productive. As a general rule of thumb, a maximum of five should be enough. Start by gathering accurate and relevant data that helps you prepare buyer personas. Some ways include –
- Conducting online surveys for current customers
- Using feedback forms and questionnaires
- Determining audience demographics through Google Analytics
- Tracking user activities and interactions through tools like Facebook Insights
For a B2B business, some top buyer persona segmentations could include –
In the case of B2C brands, some leading categories include –
Websites frequently visited
Thoroughly Assess the Market and Competition
Simply preparing buyer personas is not going to do the trick. The next step is to gauge the market carefully. This will help you predict demand and future potential for growth. For instance, ask yourself what are the main demographics purchasing from you? What are their job role and organizational budget? What are their tech spending and budget?
Another viewpoint you can adopt is understanding the wants and needs of the target audience. What are the frequent complaints based on feedback and reviews? What pain points are the most common in the industry? These pain points require not be too specific, but broad enough for you to find your opportunity.
Finally, take a closer look at the competition. Who are the thought leaders in your industry? What communication channels are they investing in? What is their likely marketing budget? Answering such questions will help you connect the dots to prepare your own marketing budget plan.
Select Your Marketing Channels
While there’s no need to fear and panic about getting the marketing channels right the first time, you still have to start somewhere. Pick a combination of two or three channels you’re most comfortable with – email, social media, direct mail, etc.
This is crucial in preparing a solid marketing budget plan because each channel will involve different costs. Not only that, but also the focus you direct toward each channel will also impact the expenses involved. For example – If email marketing costs much less than PPC ads and webinar hosting, you can create a sales cadence wherein a webinar is organized to educate leads and make them aware of a product launch.
Subsequently, a smaller amount can be allocated toward PPC ads for the most qualified leads, while the broader group is targeted mainly using email drip campaigns and telecall follow-ups. Do remember that this is also a trial-and-error step for many companies as they discover (after deployment) which strategies work in sync with their goals.
Pro Tip – While choosing the channels, also look into the costs involved. You can discuss this with your digital marketing service provider.
Track and Measure Results
Preparing a budget is one-half of the equation. The other half is to monitor results through analytics, without which you will never know if the budget is well-allocated or if changes need to be made. This process usually involves a further five steps of its own –
- Defining – Key Performance Indicators (KPIs) that work best for your business
- Measuring – these pre-determined KPIs after campaign deployment
- Analyzing – all data extracted during the time of pilot campaign deployment
- Improving – campaign performance by making necessary changes. This may involve taking a peek into the sales funnel to see if audiences are catered to at every stage.
Controlling – the subsequent improvement by noting the process down and incorporating it into the daily workflow
Get Your Marketing Affairs in Order Today!
One interesting thing about marketing budgets is that they do not stay stable. As your company grows, the budget plan should also change (well, grow may not perhaps be the right word!). Ideally, your costs should come down over time as business performance improves.
Plus, you will also begin to have a clearer idea of which channels work the best, which demographics or buyer personas prefer which communication channels over the others, etc. Always start with the right data, and the rest will naturally follow.
Finally, if you favor free marketing channels, we hope this guide has revealed the leaks and potholes of that approach. Get your personal marketing levers to adjust and steer your business dashboard toward unprecedented growth. Let the free stuff be a propeller for business growth, not the rudder that steers its direction.