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What Should My Marketing Budget Be?

Marketing looks different for every business. There are unique strategies and extensive planning efforts that go into a marketing strategy.  What works for one, may not work for others, and we all know this. But how do you set up a marketing budget according to your industry? Before we get to the how, let’s start with the what and why.

What is a marketing budget?

Simply stated, a marketing budget is the amount of money businesses use to promote their products and/or services. A marketing budget can encompass the entire marketing team or specific departments within a company. Generally, the budget is set for review quarterly or annually. It includes staff, projects, software, advertising campaigns, content development, and partnerships.

Why do I need a marketing budget?

In order for businesses to operate efficiently, you need a budget. This is typical for every aspect of life, business and personal. Your budget sets the groundwork for practically everything that can happen for your business during the year. Keeping track of spending keeps your business in line with its goals and progress on any projects. A good budget will outline all of the money intending to be spent on projects for the determined amount of time. How much you allocate for your marketing budget will depend on your industry, company size, goals and the salaries of your marketing team (if applicable).

Finally, the how.

How to set a marketing budget

When creating a marketing budget, here are a few aspects to consider: 

Total company revenue 

To set up a budget, you will first need to know how much your company is generating. This will provide you with an idea of how much money you have and how much can be spent. If you are new in business, it is recommended that you allocate around 10-12% of your budget to marketing. Conducting thorough research on your target market will help you understand your customer needs, therefore, creating an efficient marketing strategy. 

Marketing requirements

When determining your marketing requirements, two pieces of information to consider are: How many projects occurred during your allotted time period? How successful were your last campaigns? 

Even if you are not new to marketing, understand that finding that perfect strategy takes work and time in order to get it right. Reviewing your efforts and adjusting your budget or marketing plan will be necessary as your needs and circumstances change. 

Brand Awareness

This is an area your needs can vary greatly. Businesses with longevity will (generally) need less marketing efforts, as they are an established brand and have evaluated and readjusted their marketing strategies. But there is still  a need for marketing, especially to retain and acquire new customers in order for their business to continue to grow. 

New businesses usually have a higher need because they are not as established and don’t have brand loyalty. A consistent, targeted marketing strategy will help a new business create brand awareness to attract new customers and create your unique brand loyalty.

To create a budget:

  1. Conduct Research: research your target audience as well as your competitors. Learn what platforms your audience is getting their information and how to reach them. 
  2. Determine your business goals: for every new customer, there is a price. Set a goal for the amount of new customers you want to attract for a trackable goal.
  3. Review previous marketing efforts: reflect on what worked and what didn’t. Make adjustments as needed
  4. Calculate:
    1. CPL: you want to know how much money you are spending on a lead. To do this, take the amount you spend on leads and divide it by the number of leads that were generated. (CPL formula: amount spent ÷ leads generated)
    2. Conversion Rate: how many of your leads turned into actual customers is your conversion rate. To calculate this, take the number of sales and divide it by the number of leads generated (# of sales ÷ # of leads)
    3. Number of leads needed: knowing how many customers your business needs will streamline your lead generation. Take the number of customers your business wants and divide by the conversion rate you obtained from above (# of customers wanted ÷ conversion rate)
    4. Conversion costs: will give you a better view of the overall marketing budget needed in order to reach your customer goals. Take the number of leads needed and multiply that times the cost of the lead. This will give you the minimum that you will need to spend in order to achieve your desired sales. (# of leads x cost of lead)

Set up your budget

Now that you have calculated your costs, it’s time to get your budget set up. Allocate your spending to the projects that best suit your marketing goals and help you attract new customers. This step looks different for different industries, which is why it is important to make sure you have your target audience and goals defined. It is important to note, there are dozens of marketing strategies including social media, email marketing, event marketing and more that will be important in the development of your marketing strategy. Establishing an effective marketing plan will help you concentrate where your needs are needed most.

Quartz and Clay has a dedicated team to work with you to obtain your goals and maximize your efforts. Set up a consultation with us today and let’s put your plan in motion. 

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