A marketing budget is very important for every company. It helps your business continuously attract new clients and encourage new leads. Although it can sometimes take time to come up with a marketing budget, it is very important to create one. To do this, you’ll want to have a solid plan to help you work through new ideas, strategies and numbers. This blog post is designed to help you, if you’re trying to figure out where to invest your marketing dollars.
Set the Company’s Marketing Goals
First and foremost, you should set your business’ marketing goals. If you want to have a better road map of your goals, just think of the ways you would like your business to improve. This could come in the form of increased customer acquisition, better customer service, higher quality services or something else entirely. Come up with a written plan and make sure everyone is working towards these goals. Then, you should focus the marketing budget on achieving those goals. For example, if you plan to grow your customer base by 20%, you should focus your marketing on attaining new customers. Once you come up with goals, you will be more prepared to allocate your marketing dollars.
Base the Budget in Accordance to Your Goals
Your marketing goals will largely impact how much you should invest in your budget, and which marketing channels you will use. For example, if your goal is to retain current customers and maintain brand image, you won’t need to focus on channels that aggressively increase your leads and customer acquisition. If this is your situation, you’ll likely want to spend about 2-3% of your gross revenue on marketing. This is more of a maintenance marketing mode.
If you want to increase your client base, and do more than just a maintenance marketing mode, then a budget of around 5% should be fine. This certainly isn’t an aggressive marketing budget, but it should help move your forward, more so than what you would see with a 2-3% budget.
If you’re making less than five million dollars a year, a typical marketing budget would be around 7-8% of the gross revenue. For more information on setting your marketing budget, our blog post, “How to Set a Marketing Budget for Your Business” goes into greater depth on this topic.
Allocate Your Marketing Dollars and Make Adjustments if Needed
Now that you’re armed with goals and a budget, you’ll want to decide where specifically to invest your marketing dollars. Different marketing channels can have different costs. Ultimately, you’ll want to select the marketing channels that are most likely to help you accomplish your goals. To learn more about how much different marketing channels normally cost, you can read our blog post titled “How Much is Typically Spent pet Marketing Channel?” And to clarify, you can be charged anywhere from less than $100 to $100,000+ for marketing services. Don’t look at cost in terms of how much one has to pay, but rather, look at costs in terms of how much is necessary to see desired results in a reasonable amount of time.
After spending money on marketing, if you haven’t managed to meet your goals, you may want to make some adjustments. Sometimes it just takes time to see great results. Other times, it’s a change in strategy or tactics that’s needed. Even a small action like changing the call-to-action (CTA) could significantly improve your return on investment (ROI). But, don’t stop using one particular marketing channel until it’s had enough time to get good results. For example, we recently heard a story about someone who used a popular social media channel for two weeks. They didn’t get good results and decided it must not be an effective means of marketing. While the amount of time needed to see results on social media can vary from one business to the next, a general rule of thumb is to give it about six months.
Tips on Investing Your Marketing Dollars
Below are some tips to help you manage your marketing budget.
Focus on Software and Technology
Never underestimate the power of technology. It can be highly effective to allocate some of your budget on marketing automation software. There are plenty of great social media marketing automation tools, and some are completely free. Similarly, your content writers could benefit from tools like Grammarly or Copyscape. While some of the best tools aren’t free, they are often inexpensive enough that the cost only takes up a small portion of your allocated marketing dollars. And, these tools can definitely make a positive impact on your overall performance.
You should talk with the members of your marketing team and ask for their input on how software, tools and technology might help them. When you invest in quality software, you can execute your marketing campaigns more quickly. You are also helping your employees do their jobs more easily and effectively.
Remember the 70/30 Rule
Try to adhere to the 70/30 rule. Simply put, you should not increase spending on marketing activities that haven’t yet delivered results. Also, don’t cut the budget on channels that are performing well. You want to spend 70% of your marketing budget on what you know is working well. If your business is new, you won’t necessarily have any historical data to look at, to see what’s worked well. But you should still be able to make some good educated guesses on where to invest the majority of your marketing dollars.
The remaining 30% should be on new marketing strategies, tactics or tools. For example, perhaps you haven’t done webinars for your business, but you think it might be a good way to help you reach your goals. You can allocated 30% of your budget into that tactic. See if it works. Then later, it may become part of the 70% that you know works, and you can try something new.
Take time to analyze what worked last year and what didn’t work. If one strategy didn’t work, then either cut it out or phase it out, depending on the situation.
Let’s say you have a budget of $1,000. It’s unreasonable to believe this budget can cover the costs for billboards, social media, SEO, Google Ads, etc. With a limited budget, the best way to decide where to invest your money is to identify two channels (with a high ROI), and focus just on those channels. In the future, as your budget grows, you should be able to add on additional marketing channels to use and to experiment with. Also, as a general rule, digital marketing has a much better ROI than traditional marketing. That is something to consider when trying to select the best channels to use.
Are you enjoying this post? If so, be sure to subscribe for occasional email updates from our team!
Get Rid of Outdated Advertising Methods
Just because a marketing channel worked a few years ago doesn’t mean it will work now. The effectiveness of marketing tactics changes every year, and even every few months. As a business, you must be bold enough to make a well-informed decision when allocating your budget. The only way to fully analyze the marketing program that suits you best is to analyze the metrics. Unfortunately, when the going gets tough, some businesses tend to go back to the old strategies. This is not always a bad thing, but a new approach can be more rewarding.
Consider this: More than 87% of marketers use video marketing to reach their target audience. Because videos can be created on a tight budget, a business can start telling a story about their products or services and still be able to invest the marketing dollars in other activities. A couple video marketing examples include Facebook live and explainer videos.
A marketing budget is essential in reaching your business goals. While investing more dollars means you’ll reach your goals faster, you should be wise and consistent with your approach.
As a business owner, you’ll be bombarded with phrases like the “new solution” or the “next big” thing. But what matters most is how you align your marketing goals to your budget. Make sure the whole team is working toward the same goals. And, if you don’t already have a marketing team, or if you need to supplement your existing team, let us know! We would be happy to have a conversation and see how we might be able to assist with your marketing objectives. You can connect with us through the contact form below.