Everyone has heard the saying, “money doesn’t grow on trees.” Well, it’s true! Just as individuals need to set budgets for themselves, businesses must develop a marketing budget for their company. Businesses must allocate funds to support marketing efforts that in return support sales and growth goals. To make a profit and increase brand awareness, some money needs to be spent on marketing. You know, you gotta spend money to make money. That’s where a budget comes in: to ensure your company is staying on target and spending efficiently. A strategic marketing budget ensures that the amount of money spent on a variety of marketing functions will create the greatest return on investment (ROI) for your organization.
Okay, hear me out: I know budgeting may not seem like the most exciting topic, but it’s SO important to consider as a business. Marketing is key to having a successful organization, and budgeting helps track those expenses. Effective marketing leads to good customer relationships, more brand awareness, and increased business development, all of which are dependent on an accurate budget. No matter the size of your budget, it is possible to effectively market yourselves if the money is allocated well. Instead of throwing money to the wind in hopes it will serve its purpose, develop a sales strategy and then a marketing strategy to support your sales goals. The strategy should outline a plan and provide a foundation to build a budget to execute from.
Setting a budget prevents businesses from over or underspending on promoting themselves. Companies that reduce marketing expenses to save in the short term may be hurting their long-term growth. Why save $20 today when you could turn it into $2,000 in the future? On the other hand, overspending when it’s not necessary is an easy way to drain resources. If you identify what you have in your budget, you can get a better idea of which marketing methods to use to maximize your ROI. It’s important to put your money where it’s needed most, which should be reflected in your marketing budget.
Let’s not get ahead of ourselves. Before you develop a marketing budget, it is key to conduct market research so you can understand your sales funnel. Conducting research can help you figure out what areas of your marketing strategy need improvement and what resources can be used to patch things up. The research can include testing analysis and outreach tools or examining your company history to determine where you have room for improvement. Without an effective strategy, it is challenging to operate an efficient business. It can be tedious, but the research you carry out will pay off in the long run when everything is running properly.
It can also be useful to analyze your return on marketing investment (ROMI), which measures the success of a marketing campaign through brand awareness or conversions. In addition to that, according to HubSpot, “‘marketing to absolutely everyone is not actually a marketing strategy.” Narrowing down your ideal customer profile (ICP) can make your marketing more cost-effective.
So, how much should you spend? It’s not an amount set in stone, but according to the U.S. Small Business Administration, 7-8% of your gross revenue should be spent on marketing if your company is making less than $5 million a year in sales. Of course, there are circumstances where you must spend more money on marketing, but it’s important to remember that marketing is an investment in your business, not an expense. When your organization starts to view marketing as essential, just as HR, sales, and technology, it will become easier to allocate funds.
Companies must be proactive in their marketing strategy, including creating an annual marketing plan that is based on business objectives and goals. Tracking yearly goals ensures you are maximizing your budget. While an established budget is important, it is equally vital to keep things flexible to adapt to the ever-changing market. A marketing plan should serve as a guide, NOT as a rigid set of rules. To create the most cost-effective budget, take a look at previous years’ performances and check out what pain points you may have. Additionally, consider goals you want to achieve and how much you can spend to accomplish them.
Companies need to consider that not everything in marketing is measurable, like reputation and awareness, which specifically can be hard to reflect in a budget. But be sure to not equate measurability with relevance! Company reputation can make or break a business. Think about it: would you buy from a business with an unquestionably bad reputation? Probably not! Maintain your brand reputation and raise awareness of the cool things your brand does to keep customer loyalty.
Clicks and conversions are measurable and should be noted to make future business plans. How can you optimize your click-through rates? Are you not getting any conversions from your Facebook ads? Reflect that in your budget and allocate more money towards improving them!
Marketing and budgeting are not one-and-done situations. Think about it: you don’t pay for one social media ad promotion and expect it to draw in business for months. Instead, you pay for many ads over time to continue to attract consumers. You also don’t create one budget and never change it again; you adjust it when necessary. Companies need to market themselves continuously to keep increasing brand awareness. It’s also important to understand marketing trends and take them into account when looking into the future of your business. A successful marketing budget accurately reflects your marketing strategy, market trends and business goals for an extended period.
In need of a marketing strategy that aligns with your budget? KM&A can help you pick strategies that will ensure you grow your bottom line. We promise we’ll make budgeting fun (well, as fun as a budget can be at least!)
Check out our other blogs to learn more marketing tips and tricks!