Setting your marketing budget
Do you have a marketing budget?
I really, really hope you answered yes! I talk to so many businesses that when I ask them what their marketing budget is, they either say, “I don't know.” or “We don't have one.”.
Marketing budgets can be hard to get your head around. BUT…it's really, really important to actually have a marketing budget included in your overall business budget for each year.
Why is having a marketing budget so important?
There are are number of reasons to have a marketing budget. But I'm going to keep it to three:
- you don't overspend
- you can focus on marketing that gives you the best return on your investment (ROI)
- it helps measure your marketing activities
Let’s look into this in a bit more depth.
Having a set annual amount that you are going to allocate to marketing means that, not only do you know how much you're going to invest for the year on your marketing, you won’t overspend on that investment.
Yes, this coming from a marketer! But there is such a thing as overspending on your marketing – especially if you're spending on activities that aren't helping you achieve your marketing and business goals.
And that leads into the second reason.
By knowing how much you’re going to invest in marketing, you can really focus in on those marketing activities that will give you the best return on your marketing investment.
And, to be able to know which marketing activities are delivering results and giving you the best return on your investment, you need to measure them.
So, there’s three great reasons to have a marketing budget.
Now, how do you set your marketing budget?
Setting your marketing budget
Let's be honest – setting your marketing budget is a process. A boring process, but an essential process. (Although if numbers are your thing you probably won't find it a boring process!)
We have a process that we take our clients through when helping them set up their marketing budget.
The first step is asking them, in an ideal world with no barriers, what marketing activities would you carry out?
This involves listing everything – every single marketing activity you can think of that will attract, engage and connect with your target market.
And we put a dollar figure beside each activity: an annual figure, as in what you would spend annually on that marketing activity.
It’s important to make sure that that marketing activities you list are going to connect and engage with your ideal customer and your target market. There's no point saying, “In an ideal world with no barriers I would to spend $5,000 per month on Facebook advertising.” if your market is not on Facebook.
So, while you might identify advertising on Facebook as something you’d like to do in an ideal world, if your target market's not active on Facebook, then you don't really actually include that in your ideal world marketing activities list.
In an ideal world you will have an intimate understanding your ideal customer, your target market.
Actually, knowing who your ideal customer, your target market is, is a key part of marketing.
In fact it could arguably be called the most important aspect of your marketing.
If you don’t know who your target market is, then your investment in marketing is wasted, because you don’t know that the marketing activities you carry out are actually reaching, attracting, engaging, and connecting with those people who are going to buy from you.
If you don't know who your target market is, check out my blog, “How do I know who my target market is?”.
Once you’ve identified all the marketing activities you could do to attract and engage your target market, add up what your total marketing investment would be.
You usually ended up with a pretty scary figure when you add up every single marketing activity that you want to do for the year.
So, then what we do is prioritise.
Getting your best ROI
This next step, prioritising, is where the best return on your investment comes in.
So, you look at the amount of money you have allocated for your total marketing budget for the year.
Then work out which marketing activities are going to deliver the best return on investment that are achievable within that budget.
I’ll repeat that .
“activities that are achievable within your marketing budget!”
Working out your ROI
The boring numbers stuff (except if you're into numbers).
To work out your ROI ask yourself the following questions:
- what is the goal of this marketing activity?
- what is the financial investment required?
- what is the projected financial outcome?
- what is the percentage ROI?
Now use the following formula:
Subtract the final value of your marketing activity by its initial value.
Then divide that by the investment in your marketing activity.
And then multiply that to get your % figure.
Goal: You want to increase sales by $1000 per month.
Activity and Financial Investment: A month-long Facebook ad campaign investing $500.
Projected return: You project $2000 of sales for the month of the campaign.
Therefore your ROI is 300% if you achieve your sales goal.
$2000 – $500 = $1500
$1500 / $500 = 3
3 x 100% = 300%
How much should you invest in marketing?
You can Google “how much should my marketing budget be” or “how much should I spend on my marketing” and there's lots of theories around.
They say “If you're at this stage in the business cycle, you should be spending this percentage of your revenue on marketing.”. Or, “If you're at a different stage, it should be a different percentage.”.
We work with small business owners and we basically say, “What can you afford to allocate to marketing for the year? Make that amount your marketing budget.”.
So, if you can only afford to invest $10,000 for the year on your marketing, then that's your marketing budget. Then work out what's going to give you the best return on investment for that $10,000 investment.
Or, if you can afford $60,000 or $100,000, then work out what's going to give you the best return on investment for that amount.
So, it really depends on you and your business and what you can actually afford to invest in your marketing.
What if I don't have any money to invest in marketing ?
Marketing your business is essential. It's not something you simply can't do, but if you can't afford to invest any $$$ on marketing, that's okay. There are options.
What we suggest is working out what marketing you can do that is time based. Marketing that you can carry out that is going to give you a return in terms of attracting, connecting and engaging with your target market to improve and drive sales.
Believe me, there are activities that you can do that won’t require a financial investment. We don't say they're free because they're time based and everyone’s time is worth something.
Now is the time
So, now you know why having a marketing budget is really important and how to go about setting a marketing budget.
If you don't have a marketing budget in place, now is the time to get about setting your marketing budget .
If you need help, working through this process then get in touch – I'd love to help you.