There are two schools of thought to creating a marketing budget. Some companies view marketing as an investment; invest X amount and expect to get a return on that investment. Other companies see marketing as an expense. Their plan is to produce marketing tactics that are essential to keep the business running, yet the ultimate goal is to keep marketing costs down. Which is the better choice to help your company grow?
The answer depends on the expectations you set. If you require specific results, such as increased sales, be serious with your marketing budget. Treat it as a financial investment, because that is exactly what it is. Do your research, identify your true differentiation, develop a strategic plan, then create a realistic budget based on what needs to be done to accomplish the goals and expectations you set.
Be aware, if a company views marketing as an expense, it often becomes a costly or wasteful endeavor. When the marketing budget doesn’t allow for the essential upfront strategic development, and jumps directly to tactics, results can be minimal or worse. A company could project an incorrect image of who they truly are; blend in with their competitors and become nearly invisible to their market; or lose market share while smarter competitors who invest properly in marketing, gain market share.
If you feel your marketing budget truly is an investment that can support campaigns that generate measurable results, try this 6-step plan.
- If you want to start slow, select a specific market you want to reach. Or clearly articulate all the segments in your market that can buy from you.
- Identify what that market could bring your company in annual gross revenue.
- Take a percentage of that number and use that as your marketing budget. Start at 2%, 3%, or 4%, depending on your requirements, expectations and market conditions.
- Create a concise written plan that outlines what you want to achieve, and why you are different and better. Describe the true value you deliver. Be very clear on how you improve your customers’ conditions, and use that as the basis of your campaigns.
- Look at options for marketing tactics, and select those that have the greatest potential for positioning you as a leader, the best choice, and to grow your audience and generate leads.
- Then carefully and consistently monitor results. Use data analytics to understand how well your audience resonates with your messaging, and what your competitors are saying and doing online. Apply this data to frequently modify your messaging and campaigns. Become an expert in what your prospects need to know in order to buy from you.
According to Forbes, “one of the best ways to make sure that your marketing money is being well spent is to develop a comprehensive marketing strategy and come up with a solid marketing plan … it’s common for small businesses with revenues less than $5 million to allocate 7-8% of their revenues to marketing, splitting that between brand development costs such as websites, blogs, sales collateral, and promotion costs, as well as campaigns, advertising, and events.” Companies over $5 million in revenue typically allocate 3-7% for their annual marketing budget.
Perhaps most important, Forbes stated, “never base your marketing budget simply on what’s left over after covering all other expenses. Your marketing budget should be treated as an investment, something that will bring a quantifiable and ascertainable return on investment over time.”