How much to spend on marketing? Defining a marketing budget is one of the toughest exercises a business owner must undertake. Here are a few good tips on marketing budgets.
You've nearly finished scoping out your marketing plan and now it's time for a reality check.
Does the cost for the marketing programs you've outlined match up to what you intended to spend on marketing?
Experienced marketers know how to develop a marketing plan that syncs up well with the marketing budget, but first-time writers of marketing plans often miss the mark.
Here are a few marketing budget tips to keep in mind as you write your marketing plan.
- Start With a Number - Before you start writing your marketing plan, come up with a ballpark marketing budget. Think in terms of marketing as a percentage of revenue or marketing as a percentage of sales. Small firms typically spend 3-5% of revenues on marketing. Mid-sized firms might spend 6-10%, but of course it depends on your industry and on your company specifics. Still, come up with a number!
- Keep a Running Tally - As you write your marketing plan, keep a running estimate of the cost of the marketing activities you've described in the marketing plan. In this way, you'll know whether you are overspending or underspending relative to your marketing budget. It's much better to do this as you write the marketing plan, rather than waiting until the end.
- Categorize Marketing Expenses - Break marketing expenses into categories to get a better feel for how you are allocating your marketing dollars. Typical marketing expense categories are marketing communications, market research, promotions, advertising, events and public relations.
- Create Monthly or Quarterly Marketing Budgets - No need to break things down to a weekly marketing spend, and don't just budget for the entire year. It's best to match up your marketing budget to the same time frame you use for other budgeting areas.
- Track Marketing Actuals Against Marketing Budget - The only way to get better at marketing budgeting is to compare actuals to budget and learn where you need to improve the accuracy on your marketing budgets. Cycle these learnings into future marketing budgets.
- Iterate Marketing Plans Against Marketing Budgets - If the activities outlined in your marketing plan cost more than your budget, you've reached a fork in the road. You'll either need to cut back on marketing programs or find additional funds for marketing.
- Don't Lose Track of Marketing ROI - Once you've defined how much to spend on marketing, it's tempting to spend every penny of the marketing budget. That's a mistake. Growing businesses should treat every penny as precious, and money should not be spent on marketing if it doesn't have the potential of earning back more than the marketing spend. While it's true that some results of marketing spend are intangible in nature, you probably know a frivolous marketing expenditure when you see one.
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