What to consider when budgeting for marketing
First, let’s get one thing straight, as a business owner you can’t complain about marketing not delivering results if you haven’t kept to your end of the bargain and allocated a budget. The marketing budget sets the rules of the game – it makes it possible to measure - to some degree of accuracy - that magical number called “return on investment”. Everyone wants ROI on marketing spend, yet few know what they plan to invest, i.e. a marketing budget.
But how do you set a marketing budget? This is another piece of the puzzle that is often neglected by business owners quick to criticize marketing performance: a marketing plan. The marketing plan should describe the desired results expected from marketing activities and how these ties into overall sales targets. Only now can the marketing budget be set. A plan informs the budget and allows you to do what is called “zero-based budgeting”, meaning you to build the budget from the ground up based on what’s needed to achieve the goals. This is very different to simply allocating a budget based on a percentage of turnover or “last year plus inflation”.
Although a zero-based approach is recommended, there are a few basics that every budget should cover:
Ultimately, what everyone wants from their marketing spend, is sales. But a sale is only the last step of a successful marketing campaign. Before the sale, the prospective buyer must show interest, and before that, be aware of what’s on offer. It is the classic concept of the marketing (or purchase) funnel, and one should measure your success at each step of the funnel – not just at the end when the sale occurs.
Carefully tracking each phase of the marketing funnel, as set out in a marketing plan, allows you to gradually fine-tune your marketing. Are you successfully generating awareness? Is that translating into interest? Do those translate into a trial (or a meeting) and then only, a sale?
A marketing plan, with a marketing funnel breakdown and associated zero-based budget, setting clear objectives at each stage of the marketing funnel, as captured in a marketing plan, means your marketing department will be run in a professional manner, just like every other function in your business should.
Marketing can’t be treated in a less professional manner than the rest. The stakes are just as high, if not higher. If marketing fails, the business will ultimately fail. Think about it: without marketing, there is no sales funnel, meaning each sale is handled on a sample of one basis. You grow one sale at a time, almost randomly, instead of having a growth engine producing the sale, and the next one, and the next one. Don’t you want to spend money on an engine like that?
Growth should not be random. It is the reason why you need a marketing budget with a marketing plan for the coming year.
But how do you set a marketing budget? This is another piece of the puzzle that is often neglected by business owners quick to criticize marketing performance: a marketing plan. The marketing plan should describe the desired results expected from marketing activities and how these ties into overall sales targets. Only now can the marketing budget be set. A plan informs the budget and allows you to do what is called “zero-based budgeting”, meaning you to build the budget from the ground up based on what’s needed to achieve the goals. This is very different to simply allocating a budget based on a percentage of turnover or “last year plus inflation”.
Although a zero-based approach is recommended, there are a few basics that every budget should cover:
- A management component, because you can’t simply switch on the marketing taps; someone needs to project manage the process for you.
- A brand-building component to ensure the brand looks good wherever it appears. Graphic design, interior design and corporate signage and stationery fall into this category.
- A communications component, which is the part everyone thinks about first and includes digital marketing, events and conferences and various types of traditional media such as magazine advertising and PR.
Ultimately, what everyone wants from their marketing spend, is sales. But a sale is only the last step of a successful marketing campaign. Before the sale, the prospective buyer must show interest, and before that, be aware of what’s on offer. It is the classic concept of the marketing (or purchase) funnel, and one should measure your success at each step of the funnel – not just at the end when the sale occurs.
Carefully tracking each phase of the marketing funnel, as set out in a marketing plan, allows you to gradually fine-tune your marketing. Are you successfully generating awareness? Is that translating into interest? Do those translate into a trial (or a meeting) and then only, a sale?
A marketing plan, with a marketing funnel breakdown and associated zero-based budget, setting clear objectives at each stage of the marketing funnel, as captured in a marketing plan, means your marketing department will be run in a professional manner, just like every other function in your business should.
Marketing can’t be treated in a less professional manner than the rest. The stakes are just as high, if not higher. If marketing fails, the business will ultimately fail. Think about it: without marketing, there is no sales funnel, meaning each sale is handled on a sample of one basis. You grow one sale at a time, almost randomly, instead of having a growth engine producing the sale, and the next one, and the next one. Don’t you want to spend money on an engine like that?
Growth should not be random. It is the reason why you need a marketing budget with a marketing plan for the coming year.