A practical guide to determining your perfect marketing budget

If someone asked you, “What part of your business makes you the most money?” you might be tempted to answer “My sales team”, or “My product designers”, or even “Me”. However, what you should say without hesitation is “My marketing department”.

Marketing is an essential part of doing business; without marketing, news of your amazing, life-changing product would never reach the ears of your target audience, and you wouldn’t earn a single penny. However, few companies – large or small – trust and respect their marketing efforts enough to properly allocate sufficient budget for effective campaigns.

This simple guide will help you review your overall income and write a budget that suits your business marketing needs.

Analyze market-wide data

The perfect marketing budget for your business is completely unique, but observing market trends and comparing your business with others will help you understand effective strategies for allocating money to marketing.

As the economy remains unpredictable, marketing budgets across all economic sectors have periodically risen and fallen, but not necessarily in parallel. For example, between 2012 and 2013, the CMO survey found that marketing spending in the business-to-business (B2B) sector fell, but companies selling products to consumers (B2C) increased their marketing spending. In 2013, your marketing budgets may have decreased or increased depending on economic trends.

Throughout 2015, B2B marketing budgets grew to around 7-9% of overall company spend, while B2C budgets hovered around 9%, dropping from previous highs in 2013 and 2014. Of course, these percentages contain a sum total of companies’ marketing spend. , from online to offline, and they represent averages in the economic sectors. Many companies are spending above the industry average in an attempt to increase market share, and many other companies have below-average budgets, which expect modest financial growth in favor of other developments. beneficial. Nevertheless, it is useful to study what your industry as a whole spends on marketing efforts as you develop your own marketing financial plan.

Calculate your personal percentage

Besides economic trends, your budget should be influenced by the longevity of your business and your average annual income.

Start-ups, ages one to five, need to be aggressive in their marketing tactics. Although these businesses are often less profitable than older, more established businesses, they are much more dependent on reputation and brand recognition. A company that spends more money on marketing is likely to attract an audience faster and get the right rewards for its efforts. Thus, experts suggest that new businesses spend between 12 and 20% of their gross income on marketing.

Meanwhile, older businesses with five or more years under their belt have likely already successfully established brand awareness and cultivated a profitable customer base. Most of the marketing work has already been done and budgets can shrink accordingly to between 6-12% of gross revenue.

If you’re planning a brand new small business – one that hasn’t yet made a modicum of profit – the math is a little trickier. Like start-ups, you probably want to spend a lot of your resources on marketing efforts, but the exact percentage you select is entirely up to you. your working capital. Since you still don’t know what your business’s annual income will be, you need to be judicious in allocating your start-up funding and perhaps wait to pledge large sums until you are certain that your business is viable.

Allocate marketing budget

Deciding how much money to spend on marketing is a major step, but a more complicated issue — and one that has a much bigger impact on the success of your business — is when, where, and how to spend your marketing dollars.

Marketing is a diverse field, especially as more and more consumers turn to the unstable and ever-changing web. Next year, at least 30% of your marketing budget should go to online sources, but some companies wonder if traditional marketing is still worthwhile, so feel free to allocate more. As for the distribution of your online budget, Forrester Research provides some industry information:

• Search Engine Marketing, including keyword optimization, requires the largest online spend, accounting for around 14% of total marketing budgets.
• Advertisment display, like banner ads and retargeting, is the second largest, taking up 10% of total marketing budgets.
• Social Media Marketing is relatively cheap, but by no means free: most companies spend 2% of their total marketing budget on maintaining social sites.