How much should you allocate to the marketing budget?

This is not a simple question of having a specific amount. Every business is different and would require a different amount of money for their marketing strategy, however you can figure out a rough amount you should be spending, so that you know you’re not overspending on marketing. There are key factors to consider in a marketing budget, from branding, to website development, to communications and sales. Marketing encompasses a lot of things, and all of them need to be thought of and accounted for in order to make sure your marketing efforts are being optimized fully. However, there are rough estimates that can be used.

This estimate will be a percentage of how much your company is making. A basic rule of thumb is that if you’re a B2B company you should spend roughly 2-5% of your revenue on marketing, and that B2C companies should be a higher proportion, around 5-10%. A B2C company’s estimated marketing budget is higher because they need to invest more into marketing because they need to be able to reach more areas in order to reach their potential customers.

This is however just a rough estimate, and you need to be aware that your marketing budget needs to cover all aspects of marketing. So, what are some things that should be looked at to know how much you should be spending?

Researching

One of the things that you should look at is what is common for other businesses in your industry. Also taking a look at what they are spending on their marketing. Once you have an idea of what your competitors are spending you can know about how much your business should be spending.

Setting Goals

One of the most important things for a business is to set clear, achievable goals. Both short term goals, and long-term goals. Once you have goals set you can plan and take into account how much money is needed to reach each one of these goals. Once you have started working on accomplishing your goals, you need to keep coming back and analyzing how your plan is going. Are you reaching your goals under the expected marketing budget? Are you going over? You need to check this in order to make sure you are on target, or to see if things need adjusting in order to achieve your goals.

Costs & Adjusting costs

Like any function in a business, marketing is not one simple thing, it has many parts that all work together. Which means you need to accommodate for each of these parts. The website costs money to host it, and you need to keep it fresh and up to date, and that you can track who comes to your website and from where, since this information is crucial to identifying what is working to bring customers into your website. Social media costs money in order to post ads, even if it’s all organic, it’s still good to set aside money for any resources needed to create that content. Online advertising is another aspect that will cost money, from SEO work to PPC, you need to marketing budget money for this type of advertising. Traditional Media is also something that your business should consider budgeting for depending on who your target demographic is. Emails, videos, blogs, and your staff also are all things that would require money and budgeting.

As you work with these various marketing methods you can find that perhaps your estimated marketing budget needs changing, perhaps you need less in one of these areas or more in others, so these considerations should not be considered set in stone. Once you have learned what you are spending, and what is working you can adjust your marketing budget to reflect on what works for your business, and make sure to check how much you are spending against your marketing goals in order to keep on track.

What are some important things to consider for budgeting?

Branding

Branding is important for any business. What you show to people is how they will remember your company. Slogans, phrases, images, any of these can be used as identifiers for companies. Your brand should convey credibility, that it is reliable and professional. A brand that conveys it is disorganized, low advertising budget, or shady is not going to do well for potential customers. So, an important cost in budgeting for marketing is making sure your brand is well designed and formed. All of your marketing efforts rely on your brand being consistent.

Customer service

As a business you need to be able to be contacted and having too many methods of reaching you can be counterproductive as it can be hard to keep track of all those ways, and customer service is important. If they don’t get their responses back in a timely manner, it’s going to leave them with a bad impression of your business. While customer service might not seem like marketing at first glance, it is a type of marketing, personal marketing, making your customer happy and having them leave a good review which will have other people go to your business. Depending on which method of communication you use, it might cost money to have that service.

ROI

As a business your goal is to make more money than you are spending, which is often where the saying of ‘You need to spend money to make money’ comes from. The estimated percentages above were for maintaining their current customers and numbers, however that number is likely going to be higher if trying to grow the company or if you are a new company. ROI, otherwise known as Return of Interest, is why keeping track of your budgeting and how much you’ve spent is so important, it’s so you can know just how much money you are spending versus how much you are making. How much money is it actually costing to get each customer to purchase your product or service?

As you can see, having a finite number for marketing is not going to be good for deciding on your ad budget, instead it needs to be carefully looked at and reconfigured as your company grows and develops, and as the markets and methods of advertising change as well.

Marketing Budget Summary

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