Setting a marketing budget is the best way to keep control of your marketing dollars and plan cash-flow for the upcoming year. However, it’s very common for mid-sized and even large companies not to have one at all, but it can really give your marketing lead, marketing company or graphic design firm the freedom to use it and use it wisely.
So how do you set one? This is often calculated as a percentage of revenue, but it would vary from industry to industry. Go-to-Market Strategies says that 33% of companies spend 3–5% of their annual revenue on marketing, followed by 28% spending 0-2%. That sounds about right.
Looking Back – at Marketing Budgets Past
As a B2B firm, that calculation may shock you, even at 1 or 2%. This leads to my favourite method of calculating your marketing budget – look at what you spent the last year, or three – you may be surprised. No two companies are alike, so use your own history. This would include all graphic design and web development services, copywriting, printing, electronic and print ad space, sponsorships, internal time writing blogs and the like, pens with your logo on it, domain registration and hosting, mailing services like MailChimp or Constant Contact, etc, etc. – probably more than you realize.
Plan for Marketing Budgets Going Forward
Next, decide what you intend to eliminate this year by reviewing your marketing toolbox. What worked and what didn’t work? Click here for some formulas that may help you determine ROI on past marketing efforts.
You need to know what your pre-sale action step is and roughly what it takes to get people there. For example, if you have X discovery meetings per week, history shows it leads to X sales. What marketing tools helped you get there?
ROI also depends on intention: like awareness versus direct sales. Remember that all companies are unique and expectations vary. We have a consulting company who spends a lot on SEO every month and is happy with one sale per year, because it’s a $60k sale.
Then, see how you can strengthen the ones that worked well or you intend to keep. See previous blog post Think of Your Marketing Tools Like a Journey to a Sale
for some tips on how to do that.
When you review all efforts this way you’ll spot some efforts you don’t intend to continue with. Even with good ROI, our most active B2B companies spend in waves as they wouldn’t be rebranding, revamping their website or doing entire new ad campaigns every year – which is where reviewing more than one year is handy. Calculate an average.
What New Tools Do You Plan to Incorporate?
Factor in what you want to add to the mix this year. Even forays into social media aren’t free, though they’re often touted as ‘free marketing’. You may not have to buy ad space but it takes man hours. What’s your strategy? Who would do it? Do you need outside help in executing or setting it up (like an editor or ghost writer for your blog). The ROI on this type of marketing is harder and slower to recognize as relationship building takes time.
Don’t hesitate to ask your design firm for rough estimates to help with budgeting – you aren’t committing to anything.
Plan for the Unexpected
Finally, build in a buffer for unexpected opportunities. Many clients decide to participate in a tradeshow or sponsor something and are surprised with an offer of ad space they need to now fill. Or, your professional association suggests you provide branded tchochkes for giveaways at a conference. Maybe you hire new people or plan to move and will need more stationery. If you set aside a little extra, it will give you the breathing room to do it well, which often means professionally.
Sidebar: Even when something is unexpected, use your Marketing Map and brand guidelines to make sure it’s not a wasted, or low ROI effort by rushing it.
How a Marketing Budget Helps Us
We often ask clients what their marketing budget is – not so we can figure out how to use all of it, but so we have a place to start from when making recommendations. With no budget, we could easily come up with a proposal way out of a client’s means that would make professional service seem completely unattainable, discouraging all sides. Meanwhile, if we know, we can make appropriate suggestions to help them reach their goals. We can also help our clients avoid surprises as our experience helps us foresee extra expenses they may not be anticipating, which would help them stay within budget.
I think this split in valuing is also occurring because so many people are participating in public dialogues about brands. Most of us use the internet to research before we buy and find thousands of real people’s opinions and feedback. We used to just buy into whatever we were told by advertisers. Now we have much more information available to develop our own opinions. Regarding the discrepancy – perhaps the people behind ‘financial market valuing’ aren’t paying enough attention to the public and or simply using out-moded metrics.
