How to choose the right marketing budget for your video game

Early in my career, I was a brand manager and was very rarely aware of how the marketing budget I was managing was derived. As I was promoted and got more responsibilities, I started to see how budgets were allocated. I’ve worked at over seven game companies in 24 years and been exposed to a few methods. These include a revenue-percentage approach, top-down budget, voice/market budget share, and zero-based budgeting. Below, I’ll discuss the pros and cons of each method as well as the type of video games that typically use them.

Revenue Budgeting Percentage

This is a simple method that includes a forecast of the total revenue the product or division is expected to make in the next period. To arrive at your budget, you multiply the total revenue by the percentage allocated to marketing.

Advantages: It’s very simple, very direct and fair. Assuming the same percentage is assigned to all products, titles and marketing objectives, no game gets more share than another, avoiding the need for complex analytics and saving a lot of time. . The other good thing about it is that it scales. So, if a product has a very large revenue forecast, the marketing budget is equally increased due to that revenue percentage.

The inconvenients: He really has no recognition for the different strategies and budgets that may be needed based on those strategies or different external product factors. It does not take into account whether or not your product belongs to a hotly contested genre or category where your competitors are trying to outspend you to gain market share.

It also does not take into account a single idea or a particular marketing strategy in which it may be worth investing. For example, let’s say you set your revenue budget percentage and a new social media platform explodes into the market like TikTok. When you set these budgets, you had no idea because TikTok didn’t exist. But now a big chunk of your player base is consuming content, and you have an incredible strategy to launch your next TikTok presence. In the percentage of revenue budget, if your forecast does not change, you must borrow that money from another marketing tactic to which you have allocated funds. So you have to make part of your marketing campaign suffer to be able to afford this new marketing tactic.

Generally used for: Successful game launches on AAA Premium console where marketing campaigns are relatively short and expenses are compressed.

Top-down budgeting

Top-down budgeting is when senior management from a heavy financial background dictates how much you should spend.

Advantages: It’s fast and fairly predictable, which means your marketing team can plan for it and be ready to execute it very quickly. This method is advantageous when your competitor is slower to agree on budgets because it allows you to get to market faster than them, allowing you to gain some voice share.

The inconvenients: This approach removes any agency that marketing team members might have. They do not have a voice in the process and therefore may be discouraged from doing their best because they feel their input has not been considered.

It doesn’t really change with the goals either. Let’s say your goals change along the way, you need to ask the people doing the top-down budgeting for more money. For example, let’s say the game performs better three months after you receive your budget and it’s 20% over forecast. You then have to go back to the management team and beg, borrow and steal, or say, my games take off and I need more money to fuel the fire. But you don’t necessarily have a say in this process.

Finally, as with the revenue percentage model, the other negative point is that it is a fixed dollar amount. If a new tactic you wanted to exploit emerges, you have to borrow money from other tactics you intended to spend to be able to afford it.

Generally used for: standalone games that do not have a live operations or post-launch monetization strategy.

Share of voice/market budgeting

It is a goal-oriented method using benchmarks as targets. This requires good competitive data that thoroughly analyzes where your competitor is spending, how much they are spending, what tactics they are using, and what media they are spending against. It aims to erode market share against category leaders through impression generation and all sorts of marketing tactics to make you look bigger than you really are.

Advantages: It’s really good for products that are trying to catch up or for products that are early in their life cycle, especially if you have a very high quality product that is only suffering because it’s not as mature than its competitors.

The inconvenients: It’s definitely a slower process than revenue percentage and top-down approaches, respectively. It takes a lot of incredible analysis and competitive information that some teams may not be able to muster. Although one of the best tools you have for sharing voice analytics and determining budgets is to look at search volume, especially on Google and YouTube. And if you are on mobile, it would be important to check out the iTunes Store search data.

It also does not take into account outliers, such as other competitors that you do not include in this competitive analysis.

Generally used for: A game in a category where you are not the market leader.

Zero-Based Budgeting

In this scenario, the budgeting process starts from scratch, so marketers start from $0 and build a budget that matches the strategy needed to make their product successful. This requires a highly experienced and well-rounded marketer who deeply understands their product and what is needed for their product to be successful.

Advantages: It provides great agency to the marketers and teams that created the budget. They feel responsible for the marketing dollars they have to deploy because they are the ones who decided what that number should be.

This method can be effective in gaining market share, increasing brand awareness, or winning back customers, among other goals. Maybe you’re marketing an older product and have moved away from the product acquisition phase, so now you’re trying to win back loyal customers.

The inconvenients: It is a 100% forward-looking process that does not take into account everything that has happened in the past; while some of the aforementioned budgeting techniques look at historical performance and spend and make decisions based on incremental increases in historical data.

Another downside here is that it’s a long process that requires a lot of debate between marketers, product owners, and other people interested in that product about what goals to set, because the goals of the marketers may not be aligned with overall business goals. .

It’s a really difficult approach, but if done right, it can be a very rewarding process.

Generally used for: Free-to-play business models, subscription-based business models, and games with support for multiplayer online liveops where additional content is generated continuously.