How to create a marketing budget and keep costs under control
It doesn’t matter if you run a SME or a BRW Top 100 company, spending money on marketing is essential to growing your business and increasing your revenue. Many businesses don’t know how much money to allocate to marketing; don’t measure their marketing ROI; spend haphazardly; or don’t have a marketing budget at all.
Google “marketing budget” and you will get a number of suggested methods of calculating your marketing budget, most based on an arbitrary figure of 3-8% of your total revenue. However, when you ask 9 Strategic, “How much should my marketing budget be?” we will want to understand what your business objectives are so we can determine how much budget you will need to allocate.
We suggest that, before plucking a figure from the air, you follow our simple steps to creating a marketing budget:
- Use the 9 Boxes to benchmark your marketing performance – determine what marketing activity is currently working for your business and what boxes need urgent attention.
- Create a marketing plan – Knowing how you are going to spend your marketing dollar is essential in determining how much you should spend. What are your business goals for next year? What do you want to achieve with your marketing activity? Which boxes require more activity? Which boxes are currently improving your bottom line? (For more detail keep an eye out for our blog post on creating a marketing plan coming soon.)
- Focusing on the boxes you are getting right, how much have you spent on these activities over the past year? Will this figure increase next year? Add this figure to your budget – making sure to allocate it to the relevant activities.
- Take a look at the boxes that require urgent attention. What activity needs to be undertaken to improve your marketing score? Research the cost of these activities and add this figure to your budget, again make sure to allocate each dollar to the relevant activity.
- Now return to you goals for next year – will you achieve these with the activities already allocated funding? What additional activities and associated costs will be required to achieve this goal? Add these activities and costs to your budget.
- Add all the activities and associated costs to a marketing calendar. Make sure your marketing activities are spread across the year and you are not spending your whole budget in the first or last quarter.
- Don’t assume your budget is inflexible; add in a contingency. There may be times you need to undertake an unplanned activity or an unexpected opportunity that adds value to your marketing plan crops up.
- Make sure you MEASURE all your activities: their cost and their ROI. Compare what you have done in the past to what you are doing now. Was one activity more successful than another? Was one quarter more profitable than the others? Work out why.
- Revisit your marketing plan and budget annually; more often if you launch a new product or service or if your industry or business undergoes a significant change.
Marketing budgets are not a one-size-fits-all. The size of your marketing budget will depend on a number of factors: your industry, the size of your business, your margins, your business goals and how you score in each of the 9 Boxes. But one thing is the same – every company needs a marketing budget otherwise your marketing budget gets out of control.
To help you determine in which of the 9 Boxes your company needs to invest, join us at our next benchmarking workshop.