The marketing and budgeting of the marketing plan have become necessary for almost all types of businesses and companies. If you don’t know the cost of the marketing, then you can’t develop any plan. Today, we’ll discuss how to plan a marketing budget and provide you a step-by-step guideline.
What is a Marketing Budget?
The marketing budget is a documented receipt which outlines that how much your business is going to spend on marketing over a period of time like monthly, quarterly, and annually. However, when you’re working on the marketing budget, then you should consider various relevant costs like web maintenance expenses, marketing tools, recruitment costs, paid ads, sponsored posting, and etc.
Why Does Your Business Need a Marketing Budget?
If you’re thinking about why your business requires a marketing budget, then here are some of the reasons why;
- Staying on Track. When you’re developing a marketing strategy, then you would require a budget to keep you on track. However, when you have a marketing budget, then you need to track the spending record of each marketing strategy. Like you have to check whether you are spending more, or you can. If you don’t have a marketing budget, then it’s like that you’re overspending it, and that would have a negative impact on your business.
- Right Allocation of Funds. The marketing budget would allow you to rightly allocate the funds at the right place. When you have a marketing budget, then you know your limitation that how much you can spend because you know that how much money you have allocated into the marketing strategy. Most importantly, it gives you an insight that what particular digital marketing strategy or package works under your budget.
- Goals & Benchmarking. When you have a budget, then it helps you to establish realistic goals and effectively benchmark your business. Budgeting allows you to expect realistically from different marketing channels. Most importantly, it gives you an understanding that how much money you should have for the marketing.
- Long Term Plan. The marketing budget is actually the planning of the long term, it means creating your marketing long-term plans. The long term planning restricts you from overspending on marketing and stops at a certain point because of the limited funds. When you have a flexible budget, then the long-term funding would allow you to develop an effective and consistent marketing strategy.
- Investing in Business Growth. When people think of marketing, then they see it as an expense of your business. It’s important to keep in mind that you should see marketing as an investment, and not the cost or expense. It’s an investment in the growth and development of your business. You can make out most of your investment if you learn how to plan a marketing budget.
How to Plan a Marketing Budget
It’s time to address the main question that how to plan a marketing budget, Here are the 6 steps of creating the marketing budget are as follows;
Create Your Sales Funnel
First of all, you should develop a sales funnel while creating your marketing budget. The sales funnel plays a significant and critical role in your market budget because it tells you where you should spend your money.
Speaking of the sales funnel, it’s important to mention it here that the sales funnel is a process where your audience goes through various stages into becoming an actual customer. Some of the main stages of the sales funnel are as follows;
- Awareness. This is the first stage where your target audience realizes the problem and then they start looking for the answer or solution.
- Consideration. The consideration is the stage when the target audience starts actively looking for the available options.
- Decision. It’s when the prospective customers to a decision stage, and they start narrowing down their options in terms of products and companies that offer the best solution.
- Action. After making the decision, the potential customer chooses a particular product or brand and becomes an actual customer.
The understanding of the sales funnel gives you an insight into when you should apply the digital marketing strategy when people are falling out of the funnel. For instance, you may have a plethora of people in the awareness and consideration stage, and very few of them reach the decision stage.
It’s natural that some of them would leave, if the falling out of the rating is more than expected, then you should consider other options. Like social media ads, pay-per-click ads, and video marketing. They would help you to generate more leads in the funnel.
If you want to learn that how much money you’re going to need for the marketing budget, then you should study the sales cycle.
Know Your External Cost
If you want to learn about marketing budgeting, then you should start with external or outside costs. It’s important to know the expenses that are costing your company so that you could allocate the marketing budget and resources accordingly. Some of the external and outside costs are as follows;
- Operation Costs (shipping, creating a product, etc)
- Employing Costs
- Running Costs (Bills of water, electricity, telephone, etc)
- Hidden Costs (unexpected cost like market research, product market test, etc)
You should keep in mind the abovementioned costs while planning for the marketing budget. It doesn’t only tell you what types of services you should invest in, but it also helps you find ROI (return on investment) as a baseline.
For instance, the manufacturing cost of producing a product is 10 dollars, and the sale price is 50 dollars. It means the marketing channel you have chosen for the promotion of your product is costly, and you’re familiar with its cost.
Speaking of marketing channels and methods, some of the following methods that you can use are as follows;
- In-House (marketing department of the company)
- Freelances (independent marketers)
- Digital Marketing Agency (an outsider marketing company that would layout the marketing plan and do the marketing for you)
Align Your Budget with Marketing Goals
Your business should indeed have marketing goals, however, they should align with your marketing goals. The first thing you should do is to make it clear that what end results you want to achieve through marketing. Next, you should set the required budget that would allow you to reach your marketing goals. Some of the main goals are;
- Expanding Brand Awareness
- Increasing subscription rate
- More leads
- Increasing sales
- And more
When you’re creating the marketing and business goals, then keep in mind that they’re smart and specific. Your goals shouldn’t be general like increasing sales, because they won’t give the desired results. However, if you want to achieve results, then you should be precise.
For instance, your goal should be like that you would increase sales by 20% by the end of the year. You can easily measure such goals because they’re precise, achievable, realistic, and measurable. Most importantly, it gives provides you a reference point to start like how much you need and how much you should increase the sale.
Know Your Market
You should know your position in the market where you fall so that you could build an effective marketing budget. When you know the edge of competitors, then you can launch better strategies in order to compete with them. It’s better if you conduct a competitor analysis online.
Decide Your Marketing Strategy
It’s time to select the strategy for your marketing budget, and it’s OK if you don’t know what strategy to choose. Some of the main digital strategies are as follows;
- SEO (search engine optimization): it’s the organic process of ranking up your website in the searches.
Cost of SEO: it ranges from 500 to 20000 dollars monthly
- PPC Advertising: paid per click advertisement is the paid tool that would rank up your website on the top of searches for some time.
Cost of PPC: it ranges from 5 to 20% of your monthly ad spent
- Social Media Marketing: social media marketing is the organic process of connecting with your target audience one-on-one. It provides you an opportunity to build and nurture a relationship with customers.
Cost of Social Media Marketing: it ranges from 250 to 10000 dollars monthly
- Social Media Advertising: social media advertising is a paid marketing and promotional tool. The sponsored posting allows you to reach more customers and generating leads with it through compelling ads.
- Email Marketing: it’s a classic way of sending a well-written personalized message to the customers, and reminding them about the latest offers.
Cost of Email Marketing: it ranges from 250 to 10,000 dollars monthly
- Content Marketing: it’s the process of generating through your valuable content and information that you share with your target audience.
Cost of Content marketing: it ranges from 2000 to 20,000 dollars monthly
Prepare Measure on ROI
When you’re allocating a certain amount of money to marketing, then you should know whether your strategy is working is not. ROI (return on investment) is a very good strategy. For instance, if your money is making a profit and giving good results, then you would increase it next year. If it’s not, then you won’t. This is the return on investment.
How Much Should Your Business Budget for Marketing
Now, the question is that how much you should invest in the marketing budget. It depends on the following factors;
- Age: if your business is new and 1 to 5 years old, then you should spend 12 to 20% of your income on marketing. However, if your business is more than 5 years old, then you should spend 6 to 12% of your income on marketing.
- Market: B2C (business to customers) companies should spend 9% of their earnings on marketing, and B2B (business to business) companies should allocate 7 to 8% of their income on marketing.
It’s not an exact rule. Every business and company is different in terms of budgeting, goals, objectives, and marketing strategy. Therefore, you should develop a marketing budget relevant to your industry.