The budget for marketing should be determined before starting any marketing plans. This can be difficult for small businesses who have never done marketing before.
Here are some tips to get started with your marketing budget, including what your marketing spend may look like and how to track your budget. We’ve also included some marketing budget templates to help you get started.
When you are planning your marketing budget, it is important to research your industry, location, and goals. This will help you to determine how much you should spend on marketing.
Marketing Budget
The amount of money a business sets aside for marketing expenses is its marketing budget. This budget is often created quarterly or yearly.
Marketing budgets should cover all the bases, including both short- and long-term projects your team plans to undertake.
A marketing budget is more comprehensive than an advertising budget as it encompasses all aspects of marketing, and not just advertising campaigns.
Importance of Marketing Budget
If you allocate a budget for your marketing strategies, you can prevent future problems such as low staffing, lack of equipment, and insufficient reach.
If you have a marketing budget, you can research how much to spend on staff salaries, office space, equipment, marketing communications, ad design, and other expenses. This way, you can be sure you are spending the right amount of money on each project.
Marketing budgets allow you to ensure that your marketing strategies are working towards your business goals. They also give team members the opportunity to invest money into campaigns that are most likely to be successful, in terms of return on investment.
Key Elements
We’re going to talk about budgets next, and how frustrating they can be for digital marketers.
You need to be careful when creating a budget so that you don’t overspend.
In order to create a budget that people will be more likely to approve, you need to be very detailed in your planning. This includes figuring out how much each function will cost and exactly what the budget will be used for.
In essence, budgets are used to finance media costs, creative production, agency fees, and digital tools and technology in order to successfully execute a campaign or strategy.
Additionally, staff costs, training and processes can be included as part of the overall budget though this may not always be the case.
Media Costs
The largest budget consideration for any digital marketing plan is typically historical performance or estimates from the channels or media platform. This allows you to budget and forecast more accurately.
You should prioritize your budgets towards the channels that deliver on your overall goal.
The amount of money you spend on PPC will depend on your goals. If you’re trying to increase sales, then you’ll spend more money on PPC than on other channels. If you’re trying to increase interest or consideration, then you’ll spend more money on display or social media.
You should allocate your budget for digital marketing based on your overall goal, trying to balance the costs of Conversion and historical data from different channels.
If a campaign is going well, it may be possible to shift some of the media budget to another channel.
Creative Production
The second-largest expense after media when budgeting for a digital marketing campaign are production costs. Depending on the type of media chosen, you need to produce specific creative assets.
This list includes videos, social media images, advertising banners, website images, email formats, and other creative outputs that can be used on various media platforms and websites.
This means that you will be charged for the time that it takes the designer, account manager, and video production team to create a unique format for your chosen media outlet, so that you can make the most of its potential.
It is essential to leave enough budget available after media costs to produce the creative assets to run on your media choices. This will ensure that your advertising campaign is effective and successful.
Agency Fees
The cost of running a campaign through a third party includes the cost of their time, which is usually hourly. This includes tasks such as booking and buying media, managing creative assets, reporting and optimization.
This fee is usually lower than the media and production costs. Some agencies will charge their fee as a percentage of media spend, but this method pays for the amount spent, not the performance of the campaign, whether it is good or bad.
The agency is paid for every hour the media is used, regardless of how effective the campaign is. This lack of insight makes it difficult to judge how many hours are actually being spent on the campaign.
Given that agency fees are often calculated as a percentage of media spend, it can be challenging to incentivize agencies to prioritize performance. In many cases, agencies charge an hourly fee instead, which provides a stronger incentive to focus on performance.
Digital Tools
Ad serving tools are digital tools which are used to upload, manage, and serve image creative assets to your audience.
There will be fees for these tools and extra analytics tools. If more tools are needed for the campaign, it’s crucial to comprehend the value and objective of the tools before agreeing to pay for them in a budget.
It’s important to know if they are vital to the success of the campaign or simply an extra, helpful element.
Developing a Marketing Budget
1. Identify Your Marketing Goals
To create an effective marketing budget, you need to fit your short-term and long-term marketing goals into your marketing plan.
The goal of marketing is to create either a sales funnel or direct sales that boost gross revenue. The key to achieving this goal is to be specific in your marketing goals.
It’s important to remember that marketing seldom results in sales immediately. You may need to adjust your objectives as you progress with your marketing plans.
Short-term goal examples:
- Decrease website bounce rate by 5%.
- Gain 10 quality comments on social media posts per week.
- Boost brand awareness by generating 100 new social media channel followers each month.
Long-term goal examples:
- Get on the first page of Google for three of your main focus keywords.
- Create a sales funnel that generates 20% new customers consistently over the next three years.
- Develop a marketing automation flow with email marketing that saves your team five hours each week.
2. Understand Your Target Audience (Buyer Personas)
A buyer persona is a character representation of your target audience. It’s important to not have more than five buyer personas so you can target your market more effectively.
When creating your buyer personas, it is important to be as specific as possible, and to let data be your guide.
These are some ways to gather data to help you develop your buyer personas:
- Survey your current customers.
- Interview people you think may be in your target audience.
- Use Google Analytics to determine audience demographics.
- Use Facebook Insights to track user interaction with your brand.
In each buyer persona, include this information:
- Location
- Age
- Marital status
- Job title
- Approximate income
- Education
- Motivations and goals
- Sources they visit for information
- What makes their life easier?
- What keeps them up at night?
- Bonus: a fictional name and photo
3. Understand Your Market and Competition
You should research your target market to learn more about them. You can use primary and secondary research methods to collect data about your target market.
What are some key questions you should ask about your target market? -Where do they live? -What is their education level and average income? -Are there any exterior forces that could impact them and in turn affect sales?
A person’s budget is greatly influenced by the current economic climate. Along with this, other trends in the market can have an impact on spending and saving.
What is happening with technology at the moment? Are people using different methods to shop or make payments?
What are the top needs that your company can fulfill in the market? These won’t necessarily be a need for your specific product or service, but be a need in the broader sense.
It’s important to understand what’s working for your competition in order to make strategic decisions for your own campaigns. Market budgeting also involves researching the competition.
You need to find out who is performing well, what type of ads and marketing strategies they are using, and how much they are budgeting for their marketing department. This will help you understand what is working for your competition and make strategic decisions for your own campaigns.
The amount of money a business spends on marketing may be influenced by the type of industry it is in, with businesses in different economic sectors spending varying amounts.
A recent CMO Survey has found that while B2B companies spend an average of 6.9% of the budget on marketing, B2C companies spend an average of 8.4%.
4. Choose Your Marketing Channels
There are four main types of marketing channels that you should consider. The channels that will generate the best return on the revenue you spend are the ones where your buyer personas are present.
Digital marketing
There are several ways to market a product or service online, including social media marketing, online content marketing, automated or manual email marketing, online advertising with pay-per-click ads or social media ads (paid media), and search engine optimization.
Inbound marketing
Some areas of inbound marketing overlap with digital marketing, for example SEO, blogs, videos on platforms such as YouTube and Vimeo, e-books, and other types of content marketing.
Outbound marketing
Outbound marketing is not always easy to track, so using it together with inbound marketing can be useful. The most trackable form of outbound marketing is email marketing.
Other types of marketing that occur when a company reaches out to customers, rather than customers coming to the company, include TV and radio advertisements, direct mail, press releases, trade shows, and promotional products.
Brand awareness campaigns
These channels may include social media marketing and advertising, content marketing, public relations, and video marketing and advertising, which can overlap with the above.
Now that you know which channels to use as part of your marketing strategy, you can better determine your budget. Each channel has different costs associated with marketing on it.
Social media advertising tends to be the most cost-effective.
Key Considerations
When you’re planning your budget, the following considerations are key areas for you to evaluate:
- How many people are in your target audience?
- What are your objectives?
- How many people could you realistically make customers?
- How much money are you willing to invest in digital?
- Have you allocated budget to cover busy months or campaigns?
- Are you allocating enough ad spend?
- Are you under-investing and limiting your impact?
Marketing and Budgeting
Long-term budgeting plans allow you to map out your investment strategy month-by-month over a specific period of time, helping you to secure your investment.
If there is no plan, money will be redistributed, resulting in digital investments being underestimated, under-achieving, and eventually being questioned.
If there is no plan, the money will be spent on something else.
This means that you should take into account moments when the investment will not be stable when you are planning over a period of several months.
During seasonal periods, try to anticipate how your budget might need to increase or decrease. For example, retailers need to account for increased spending during Christmas.
Retailers underestimate how much money they will need to spend during the Christmas season.
If you have a budget, you can make sure that everyone is sticking to it and that they are following the numbers.
The next stage is reflection, where you think about if you spent too little or too much in certain areas, and plan to change it next time.
If you invest too much in the beginning, you may not have enough money left to do what you originally wanted.
Constructing a plan that envisions potential fluctuations and allows you the flexibility to shift gears can be the key to a successful digital strategy campaign.
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