The problem
As you are setting your marketing budget for the upcoming year, it is perfectly normal to be wondering …
“Where should I invest to help my business to grow?”
“Where am I wasting money online?”
“Am I confident that my team and partners have the knowledge and skills to deliver?”
When budgeting, a marketer is predicting future cause and effect based on trend information. So, without having to rely on a crystal ball, what’s the best way to approach building your marketing budget?
The old ways
Typically, we see marketers set their budgets based on a percentage of planned turnover, (on average 8% of ex VAT sales, but this varies significantly by industry and growth stage of the business). Finance teams like this approach as it allows them to control cost in response to trading fluctuations. However, isn’t it marketing’s job to create sales opportunities?
Sometimes we see budgets set by benchmarking competitors. However, do you really know how they divide up their spend, or whether they are getting the results that they were hoping for?
Fortunately, we are seeing less “set and forget” attitudes to marketing budgets, where budgets are set at the beginning of the year and not reviewed until the next budgeting cycle.
So, how do you go about building a well thought through budget?
5 steps for planning your marketing budget
1. Define (or refine) your Strategy, including how marketing supports it
A marketing budget is a plan as to how your marketing efforts are going to help you to achieve your business goals.
You simply can’t propose a solid budget without fully understanding the business strategy.
Without being clear on what the business is setting out to achieve and when, who the business is targeting, and what your competitive edge is you can’t even start to create a plan.
There are many, many business strategy templates out there, so if you don’t have one, start by choosing the simplest that resonates with you, and build on it as you develop your thinking.
Once you have your business strategy documented, you can develop your supporting digital strategy. Don’t be tempted to plunge into the numbers yet – this is setting the context for how you are supporting the overall strategy. Your marketing strategy should therefore cover :
- Brand framework (who you are, what makes you different and how you articulate your identity)
- Product or Service framework (what you do and how it solves your customers problems)
- Target customers (who you sell to and where they discover and engage with businesses like yours)
- The typical customer journeys (the channels you use and how customers move through your sales funnel)
- The competitor landscape (the level of the market you are targeting and how crowded the market is)
- A roadmap (your outline calendar, whether activities are interdependent and how they are prioritised)
2. Review your current marketing spend
Create a detailed breakdown of your spend.
Consider :
- Website
- Content creation
- SEO spend
- PPC spend
- Social Media
- email activity
- Events & trade shows
- Promotional items and samples
- The marketing team
- Consultancy support
If your spend is complex, you may wish to break it down into sub-categories.
3. Assess how effective your spend has been
For each line, consider whether it is supporting you in achieving your business goals, whether it isn’t, whether it could do better, or if you don’t know.
For each area, create a SWOT analysis to get you thinking about what has happened and the “so what” for the future.
A well structured budget will be tied to a set of Key Performance Indicators – this gives you a numerical record of how successful each area of your marketing has been. When it comes to pitching your budget to the Board, this data will support you in winning their approval.
If you haven’t tracked KPIs in the past, gather what data you can so that you can compare your different activities in a commercial way.
4. Look for opportunities to optimise what you already do … and don’t forget to trial new activity!
Gather feedback from the wider team that you work with, talk to your service providers and consider their feedback in line with your current capability and the business plan.
If your goal is a 25% sales increase, what levers can you pull to deliver it?
- How many new customers do you need? What is your best performing customer acquisition channel?
- Calculate what you are prepared to spend to acquire a new customer x number of new customers to give an acquisition budget.
- Can you persuade existing customers to buy more, or more frequently? Which channels should you invest in to create urgency or add on sales best?
- Maybe you need to make the argument to grow your PPC budget
- Maybe you need to invest in improving your content quality and frequency
- Maybe you need to lean on external expertise to extend the knowledge and skills within your team
You may also need to make the argument for some new investment, say refreshing your website , new team members, upskilling the team or even starting to operate in a new digital channel.
Do your research, articulate how your plan supports the business strategy, know your costs and demonstrate the ROI you are generating to give yourself the best chance of getting your budget proposal signed off.
However, when planning your budget, do remember the “moonshot principle”, which is …
Devote around 15% of your marketing budget to new, exploratory marketing channels to uncover future stable, reliable channels.
Taking some calculated risks and conducting trials will futureproof your marketing strategy. Not all of them will work, but you will uncover some golden nuggets that will eventually become part of your marketing armoury.
5. Follow up, monitor and adapt
Once you’ve got your marketing budget in place, monitor your performance against your KPIs and review them monthly. You will almost certainly need to adjust your activity and / or your targets quarterly based on the effectiveness of your various marketing activities.
Never set and forget!
Common marketing budget mistakes to avoid
- Continuing to spend in channels that deliver poor ROI
- Not using data to optimise your campaigns
- Not testing new ideas
- Discounting current customers
- Using last year’s budget
Summary
Budgeting your marketing spend, and allocating where to spend it is one of the most valuable decisions that a marketer makes. It’s worth taking time to plan it well.
If you’re not ready to place your bets yet, it may be time to rethink your digital strategy. Not sure where to start? … contact us for a no commitment chat.
