The Ultimate Guide on How to Create a Marketing Budget Plan
Many small-to-medium-sized companies lose thousands of dollars every year by forgetting to optimize their marketing budget periodically – typically every quarter, but most certainly on an annual basis.
This can result in dollars spent targeting the wrong demographic, overspending on the wrong kinds of ads, and reduced productivity as marketing staff try to implement a recycled version of last year’s marketing budget plan.
If this describes your situation, then I have some good news — next quarter is right around the corner, giving the perfect opportunity to refocus your marketing goals and strategies!
The best place to start? Your marketing budget plan.
This comprehensive marketing budget guide will aid in helping you understand the in’s and out’s of setting up your marketing budget plan for success.
What is a Marketing Budget Plan?
A marketing budget plan accounts for all the associated costs of marketing. This includes, but not be limited to things like.
- Website design and development
- PPC campaigns
- Content marketing (including blogging)
- Social media marketing
- Search engine optimization (SEO)
- Marketing staff and contractors
- Marketing automation software
- Press releases (public relations)
- Event marketing
- Radio advertising
- Television advertising
- Awards and recognition
- Direct mail marketing
A quality marketing budget plan will also detail a business’s marketing strategy, goals, and other associated themes. These things ensure that the budget is being spent on the right things and in the right way at the right time.
How Much Should We Spend on Marketing?
Ready to fine-tune your marketing budget and success in the coming months? Here are 3 steps you can take to create a marketing plan that achieves results to determine how much you should be spending on marketing.
1. Every Good Marketing Budget Begins With Analysis
It doesn’t matter how big your marketing budget is, you won’t grow your business if you’re shooting all those dollars in the wrong direction! This is why every successful marketing budget begins with strategy.
Areas that demand strategic attention include:
Review your past marketing trends, expenses and results.
- What are your marketing results from last year?
- How much traffic did your website get?
- How many customers did your marketing efforts generate?
- Did certain blog posts or ad campaigns perform better than others?
Analyzing all this information will ensure that you capitalize on the lessons learned in the previous year and carry your successes forward into the next 12 months.
Review your competition to determine where their marketing dollars are going.
Now that you know HOW your marketing efforts paid off over the last year, it’s time to analyze your competitors. Put on your sleuth’s hat and do some reconnaissance!
This can include reviewing competitor profiles on LinkedIn and Facebook (Did they report any big accomplishments or news this year?) and doing an SEO audit of their website (Did their traffic increase? What are their top-performing blog posts from 2019?). We typically ask four questions when analyzing our clients’ competitors.
- What are they doing well with their marketing?
- What are they NOT doing well with their marketing?
- What is their core marketing message?
- What can we learn from them?
Update your unique selling proposition.
Armed with your competitor research, sit down and compare your company to theirs. Are you clear on what sets you apart from the competition? Defining your unique selling points or key differentiators is crucial for a successful marketing budget plan.
Update your buyer personas.
Your marketing results are only as good as your demographic research — after all, you won’t find success marketing skateboards to 70-year-olds! Review who your best customers were in 2019 and update your buyer personas with this data.
By taking these steps and nailing down your strategy, you can ensure that your marketing budget is aimed in the right direction.
2. Define Your Annual Goals & Strategies
Now that you’ve got some solid strategy under your belt, it’s time to envision — what are your goals for this coming quarter and year? You need to align your growth and sales goals with your marketing goals in order to create a successful marketing budget plan.
Need help defining your company’s goals? Here are some questions to answer with your leadership team:
- What is our business’ vision?
- What are our sales targets for the next quarter? What about the next year?
- What are some of the obstacles we need to overcome
- What trends in our industry and market are we facing?
- What are the long term changes we’d like to see in our company over the next 5 years? How about in 10 years?
Answering these questions will help you set your goals for this year. When Fannit helps plan for marketing performance we look at qualitative and quantitative goals.
An example of a qualitative goal could be – improve the way our website converts visitors so they have a better experience and we convert more leads from our website.
An example of a quantitative goal – improve lead conversion on our website from 4% to 6% to get 50 new qualified leads each month.
Looking at your marketing goals from both qualitative and quantitative angles will serve as your compass when it comes time to make your marketing budget plan.
In addition, if you are unable to quantify your goals, it will provide an indication of the work needed in order to track your numbers.
3. Learn Percentages of Marketing Spend to Revenue for Your Industry and Business Size
Your marketing budget plan will, of course, be unique and tailored to your business strategy and goals. That said, it can be helpful to understand marketing budget trends in your industry. For example, maybe you don’t need to be spending 10% on marketing when all your competition is only spending 3%.
Some marketing budget trends from the past couple of years include:
- B2C companies spend twice as much on marketing than B2B companies (14.9% vs. 8.9%).
- CMOs report that they spend an average of 7.9% of overall company revenues on marketing.
- According to CMOs, companies that make more than 10% of their sales online spend 13% of their total budget on marketing.
- Businesses that lack internet sales only allocate 10.6% of their budget to marketing.
- Since 2017, B2B and B2C businesses have all consistently increased their marketing budgets.
- Marketing budgets are consistently shifting to digital channels — a trend that is projected to continue for the foreseeable future. Studies predict that digital marketing budgets will increase from 44% to 54% by 2024.
- The majority of B2B marketers spend 40% of their total marketing budget on content marketing.
Of course, numbers like these are averages across economic sectors. In addition to these, you need to find numbers on your specific industry and market.
Also, remember that these percentages are guidelines. Many companies spend over or under the industry average depending on their unique business goals and strategy — your business will likely do the same.
Need a full marketing plan rather than just the budget? You may benefit from reading our ultimate marketing plan guide.
How to Determine Your Marketing Budget
Combining the three previous steps will help you solidify your marketing budget plan, but how do you decide on the final dollar figure?
One of the biggest factors that should impact how much you spend on marketing is the age of your company. How long have you been in business?
Marketing Budget Recommendations for Young Companies
If you are a new company, say, 1 to 5 years old, then you need to be more energetic and competitive in your marketing budget plan. You are competing with older, more established businesses, and by investing more in marketing you increase your chances of converting clients away from the competition and into your business.
For young businesses, most experts recommend that you invest 12 – 20% of your gross revenue into the marketing budget.
Marketing Budget Suggestions for Established Companies
Are you an older company? Businesses that have been around for 5 or more years don’t need to spend as much on marketing because they already have an established brand presence.
For older companies, experts advise spending 6 – 12% of your gross revenue on marketing.
Marketing Budget Best Practices for Start-Ups
If your company is a start-up or new business, then the amount you spend on marketing is highly subjective to your unique situation and your working capital.
Because you’re a new face on the market, you’ll want to invest a greater amount into marketing, but you shouldn’t sign off on any large marketing expenses until you know for sure that your business is viable.
Get a Custom Marketing Plan for Your Business
Are you still a little confused by how to make a budget plan? Contact my team of marketing professionals today and we’ll create a custom marketing plan that boosts your marketing ROI and increases sales.
We have been helping small-to-medium-sized businesses for over 10 years and have the expertise and resources necessary to fine-tune a marketing strategy for your business.