As Steve Jobs demonstrated when he reinvigorated Apple with the release of the iPod, marketing is one of the most vital parts of a business budget. And just like in other areas of the business, nailing down an effective strategy helps ensure your company stays on the road to success. You want your marketing efforts to generate quality leads that will convert to new sales and revenue. After all, you may offer the most amazing product or service in your industry, but if no one knows you, your story, or how you truly stand out from your competition, your company is destined for a dismal outcome.
Devoting an inadequate portion of your budget to marketing (or even worse, neglecting to acknowledge it at all) puts your business at risk of hitting a brick wall, and quite possibly, failing altogether. Steve Jobs understood the importance of the brand, which explains why Apple and many of the world’s most successful companies allocate a significant piece of their budget to marketing.
Marketing matters!
So, how much should you spend on marketing? While the answer is subjective in many ways, an annual survey from Chief Marketing Officers found that B2Bs typically spend between 7-9% of their revenue on marketing and B2C’s should spend at least 9%. We’ve even asked some of our clients and professional acquaintances about their internal “rules” for marketing budget allocation and learned there is a general B2B trend of investing 20% of an overall revenue growth goal in marketing. For instance, if a $5 million company has a goal of doubling to a $10 million over a 3-year period, the marketing spend stretched over those 3 years would be $1 million (20% x $5 million) or $333,333.33/year.
With that said, it’s time to get to work!
There are three important factors to consider when developing a budget for marketing, and it’s important to review and analyze these factors throughout the year. In other words, please don’t wait until the end of Q4 to figure out if your strategy makes sense! Smart, purposeful planning makes the difference between an easy or painful budgeting exercise - follow these three tips for optimal results:
1. Organize Financial Information
Regardless of the size of your business, I’m sure we can all agree that financial reports just often form daunting piles of paperwork. This is all the more reason to prioritize your finances. While it can be tempting to rely on estimates based on the trends in your industry, industry trends will not help you develop a marketing budget that makes sense for YOU; instead, a thorough and detailed approach will. First - how much does your company make on a monthly basis? If that number varies, you’ll need to organize the information based on reliable revenue. In other words, if your average monthly income ranges from $7,000 to $10,000, you’ll want to set a reliable revenue at $7,000. This ensures your budget will be built on a foundation of known, quantifiable entities.
2. Allocate Your Marketing Budget Dollars
Armed with your goals and a budget, you can now get down to business by developing a tactical plan that’ll bring your marketing dreams to life. The complexity of your marketing plan will, of course, depend on the budget you have identified, however, there are some fundamentals you should consider: SEO, social media, paid advertising, blogging, and email marketing. Your marketing strategy depends on your audience, and which types of media your buyer personas are consuming most frequently.
Once you’ve determined the channels your marketing dollars will be allocated to, you should decide how much will be spent and where. Beyond the limitations of your budget, you also need to consider which outlets have worked in the past. If you’ve noticed that cost-effective social media paid advertising has had high response rates with a large audience, consider doing it again - even if you have the funds for more expensive alternatives. But of course, if budget allows, experimenting with and testing new channels could prove incredibly valuable as well.
3. Measure your ROI and Make Changes
When measuring your return on investment, measure monthly, quarterly or semiannually, depending on the marketing activities your company chose to pursue. Consistent measurement provides an in-depth look at what is and isn’t producing results. Are you seeing specific or overall increases from one area? What about an increase in leads? Are these leads converting? These are questions you should be paying attention so that you can decide how to disperse your budget in the future.
For example, if you launched a social media campaign that cost you upwards of $6,000 but only brought in $2,000 in new sales, you should probably tweak your budget to reduce social media spend for the following year, or re-examine the content within the campaign. If you attended a trade show that cost you $10,000 and brought valuable brand recognition but no sales, you need to factor this into your decision about attending the event next year. The tools that provide the biggest bang for your buck should be increased accordingly. Don’t be afraid to make changes here and there. After all, technologies and marketing opportunities are constantly changing so you’ll need to make room for change eventually!
Marketing should be thought of as an investment, not an expense. Instead of getting flustered and dreading Q1 2016 budget planning, follow the tips above and make it a process you’re proud to do. You’ll be able to prevent overspending on marketing, and effectively test different strategies to determine what provides the best solution for your business goals.
Now, we know this is certainly easier said than done, so we’d love to help! Stratus has helped many companies like yours create successful marketing budgets and strategies. If you’re ready to get started on that path, or just want some information on creating a marketing strategy that falls within your budget, download our free guide, “Experience the Marketing Revolution.”
