What’s the first rule in determining your marketing budget? If you don’t know, congratulations, because there is no hard and fast rule. While 10 percent of revenue is a popular figure, budgeting should be a process that revolves around your company’s specific situation, goals and requirements.
According to one CMO survey published by the American Marketing Association and Duke University, the averages for marketing investment as a percentage of revenue by business type were:
- B2B Product Businesses: 10.6%
- B2B Service Businesses: 10.1%
- B2C Product Businesses: 16.3%
- B2C Service Businesses: 10.9%
There are many considerations for planning your marketing budget from ground zero. In addition to your projected gross revenue, your industry and business stage are primary considerations. Newer companies trying to build recognition for emerging brands among markets that don’t know them may need a larger budget. More established brands may require a smaller budget to maintain market familiarity. Many businesses allocate up to 3-5 percent of projected gross revenues for start-up marketing and 2-3 percent of actual or projected gross revenues for run-rate marketing.
Certainly underfunding marketing is a mistake, but proper budget allocation is just as crucial to ensure you cover key bases. First consider the two broad buckets—brand development through your website, blogs, sales collateral, etc. and promoting your business (campaigns, public relations, social media, advertising, events, etc.). Then home in on the specific areas contained in these buckets. The actual amount for each area depends on the age and size of your company, product goals, and reach (national, local, global). Your buckets may include the following:
- Social media
- Public Relations
- Content Development
Align Budget with Goals & Measure Results
Your budget allocation should align to your marketing plan, which explains how you are going to achieve marketing goals within a certain timeframe. The budget needs to be somewhat flexible for accommodating unplanned opportunities and needs, such as a lead-generation campaign to boost sagging sales or an event sponsorship. And while marketing plans should be created/updated annually at a minimum, launching a new product/service and changes in the market landscape changes (a frequent occurrence today) requires reassessment of a plan.
Don’t forget about a plan to measure how the activities you’ve budgeted for are impacting marketing goals. You may need to adjust your budget on the fly based on actual results, so stay on top of them monthly with readily available analytics including but not limited to:
- How many product inquiries and sales leads were generated, and what is the potential value of those leads?
- How many deals were closed and at what value?
- How much did website visitor traffic grow? Did the number of page views and time spent on your website increase?
- How many subscribers signed up for your blog? How many new Twitter followers did you add?
Budgeting for annual, semi-annual or even quarterly research into your target market helps ensure that budgeted activities are reaching and impacting them. The results of this effort are extremely helpful in allocating future budgets that are based on real market perception.
Determining and allocating your budget sets the stage for your success. We know what has worked for our clients. And we can help you create a communications plan that meets your budget and achieves your goals. So let’s talk. Call us at 651-247-6640.