Are you spending, spending, spending with not a ROI in site?
Do you know how much you spend on your marketing activities each day/week/month/year?
Do you have a limit on what you spend on your marketing?
I see a lot of marketing plans that look like they have a lot of thought and research behind them. They
- have an overarching strategy
- identify the target market
- have clear objectives and measurements in place
They are missing one thing – a marketing budget.
And the risk of not having a marketing budget is that you can spend too much of your revenue on your marketing and on the wrong marketing activities (yes, this from a marketer).
By putting a marketing budget in place, you will know exactly how much you are spending (or planning to spend) on your marketing activities. And this helps you to resist the temptation to spend your hard-earned dollars on haphazard activities that are not aligned with your strategy.
Having a marketing budget in place also helps you measure the success of your marketing and understand your return on investment (ROI) in financial terms.
Your marketing budget and your marketing plan
In your marketing plan, you may have strategies that are going to be more expensive than others. Or you may have more marketing activities included than what you can budget for.
Chances are your marketing plan has a multi-layered approach (and you aren’t putting all your eggs in one basket).
By allocating a budget for each strategy/action you can see your total marketing budget for the year. And then you can calculate the percentage of your total revenue that you are spending on marketing.
Now there are lots of articles out there in Google world that will give advice on what your marketing budget should be. As a general rule of thumb it is:
- 12% to 20% of gross revenue for businesses in their first five years
- 6% to 12% of gross revenue for established businesses
So, what happens if you develop your marketing plan and your marketing budget exceeds what you “should” be spending?
There is good news
If the total of your marketing expenses exceeds your marketing budget you can prioritise your marketing activities.
That means not actioning all the marketing activities in your marketing plan.
Simply prioritise the activities that are going to give you the best ROI first.
And if those activities generate more revenue than expected, then you can carry out some of your other marketing strategies.
And, as always, continue to focus on those strategies that will give you the best ROI!
Happy marketing budgeting peoples.