This is the first in a series of four blog posts focused on marketing strategies and tips as companies set plans for the new year.
Planning your marketing budget for the new year in a time where there has been so much uncertainty can give you pause. I’m a proponent of encouraging companies to refrain from cutting their marketing spend during times of distress because it’s a lot harder mountain to climb back up without it. Harvard Business Review has a great article on the topic as well.
For some, a marketing budget is new territory–it’s not something that has been readily planned for or tracked on paper. And, in a year where things were anything but normal, what should you plan for in 2021 and beyond, and how can you set a marketing budget to work with you to reach company goals?
Prep: Key marketing budget questions to ask
Before diving into your marketing budget you need a good understanding of your target market, your sales funnel and your business goals. What are your pain points and how can you utilize marketing to overcome them?
Talk with your team about your sales funnel. Where are customers getting hung up? What areas of the funnel are easy to keep filled? What about the areas that are a struggle to move the customers through?
Be honest with yourself about performance and set realistic goals. If you want a larger share of the market but are planning to slash your digital marketing budget, for example, it’s going to be hard to meet that goal.
Marketing budget pre-planning discussion questions include:
- What are your business goals (for the quarter, the year, 3 years)
- What is your percentage of leads vs. conversions?
- What does your website traffic look like?
- Where does your business come from (and is that sustainable?)
- Will you use advertising throughout the year (which types?)
- Is your website a good sales tool (i.e. bring in and adequately track leads/potential customers) or might a redesign be needed?
- Will you participate in events (virtual or in-person); what will be needed to support those?
- What additional resources are needed to drive your business goals (i.e. marketing consultant or agency, software, internal staffing, etc.)
As I mentioned in a recent webinar, think about your potential cost(s) of your inaction. In other words, if you don’t invest in marketing, if you don’t increase your spend, if you don’t do anything, will you end up losing a portion of your share of the market? Will your pipeline dry up? Will you continue to stay at a plateau (or decline)?
Instead of thinking about marketing as a cost or expense, think of it as an investment; it will grow over time but you need to invest in that in the long term.
Marketing budget categories
It’s beneficial to maintain a master marketing template that tracks your annual budget (broken down by month) and the dollars allocated for each marketing category. This should give you a snapshot of actuals versus budgeted dollar amounts and your year-to-date spend (in each category and as a whole). Allocate your marketing dollars into categories such as:
- Branding (think visuals like logos, business cards)
- Consultant/agency services
- Content and/or design creation
- Printing and mailing
- Public relations
- Salary/wages (sometimes this is an operations expense)
- Software (email marketing, CRMs, social media, etc.)
Spreadsheets will help as you can construct formulas for automatic updates and most accounting software systems provide the ability to export budget items and actual spend into your spreadsheets (or easily manipulate to the format you need).
Add a tab in your master marketing budget for details which will have the same categories listed and itemize spend per campaign, product, purchase or otherwise. Always account for contingencies. Depending on the size of your budget, a 1 to 5 percent allotment for miscellaneous budget needs is helpful.
Marketing budget examples
No one likes to talk about money. My philosophy is if we don’t talk about it, we’re doing ourselves a disservice and can run into unusual expectations. Yes, there are ranges. No, not everything can have a set price. Sometimes it will be easy to quote a marketing project and other times there are too many factors to know exact price points.
For context, small businesses under $5M in revenue allocate, on average, between 7 and 8 percent of that revenue to marketing. Here’s what that looks like from a dollars standpoint:
If you are looking to grow or make significant headway in the market, a marketing budget of between 10 percent and 12 percent of revenue is ideal.
Whatever you do, don’t base your marketing budget on what’s left after expenses. Invest in marketing. Plan for it just as you do every other part of your business.
Grab your business goals, your P&L (profit & loss statements), marketing metrics and expenses from prior years as starting points. Do your research. Ask questions and get feedback from others. Make decisions based on quality and relationships (as well as breadth of knowledge) versus lowest price.