How to Prepare & Allocate Marketing Budget
If you have been wondering how to determine the marketing budget for your company, then keep on reading. No doubt, that marketing is one the best investment a new or established company can make for future growth.
What is Marketing Budget
Definition: Marketing Budget estimates the costs required to promote a product or service. It allows companies to track customer acquisition costs, set KPIs and measure their marketing campaigns performance.
How To Calculate Marketing Budget
Most people think there’s a big amount behind the marketing budget. But, a good marketing agency will help you to determine what will work best for your company to produce the highest ROI. It is imperative to know that every company is unique, but there is a simple way of figuring out the proper marketing budget for your company. This article will guide you on how to determine the right marketing budget for your company, big or small.
Define Your Revenue
The first step is to determine your total annual revenue: you can use gross or projected.
Gross Revenue is the amount received prior to any deductions or allowances like taxes, rent, cost of goods sold etc.
Projected Revenue is the earnings the company estimates to generate during a specific accounting period.
Marketing Budget for New vs. Established Company
The new companies require a higher marketing budget because they are unknown on the market so they need to build awareness and trust for their brand.
On the other hand, established companies do not require a big marketing budget, since they are already known by customers that purchase their products or services. Although, they still have to market their products.
Marketing Budget for New Companies
The first step to determine the marketing budget for new companies is to have a business plan in place. New companies should allocate 10-15% of gross or estimated revenue to marketing. If you think that as a high amount, think of that this way: no one will know that your company exists and how great your product is without marketing, even if your product is innovative and has superior qualities. So, to promote your company takes time and an effective marketing strategy.
Relying just on a word of mouth is not enough anymore. As a new company, you need to take your marketing to a new level. It is important to mention that, a marketing budget should be a major investment for new companies. Marketing makes your company and product known and as a result, it brings in new customers and leads to your business. Once your company has been in business for a while and has established its reputation, you can reduce the marketing budget.
Marketing Budgets for Established Companies
Established companies should allocate 7-10% of their gross revenue to marketing. While the older companies still need to market, the number is smaller compared to the new companies, because older companies already have established a reputation and gained loyal customers.
Lastly, there is no defined number for every company to allocate to the marketing budget. Knowing the marketing budget is the first step for creating a marketing strategy and plan for your company.
What Marketing Costs Include
Marketing costs include all expenses associated with creating brand awareness, generating new leads, and converting them into paying customers. Below is a break-down of the basic marketing expenses.
1. Brand Development
Brand development includes costs associated with website creation, the design of a logo, business cards, flyers, and brochures.
2. Social Media Marketing
The good news is that social media marketing is free unless you want to run ads and promotions. Time is the investment that you have to make. It will consist of setting up and optimizing profile, creating content, designing graphics, growing following and engaging with your audience.
3. Search Engine Optimization (SEO)
After your website is designed, the next step is to ensure that your potential customers can find it. Search engine optimization is summarized in 3 main stages. They are the on-page optimization, off-page optimization, and maintenance. On-page optimization makes sure that each page on your website is optimized to achieve a ranking for a specific keyword. Off-page optimization makes sure that search engines (and users) are able to find links to your website from other similar websites. And, SEO maintenance ensures that your website is able to maintain or gain visibility in search engines in the absence of issues like broken links, penalties, planning strategy for future ranking etc.
4. Online advertising
There are lots of benefits of online paid advertising, it allows to increase brand awareness, improve SEO, and it is a fast and effective way to generate leads. Online advertising consists of Google ads, Bing ads, and social media, where you can promote your company or product. Online advertising works best for companies that want to acquire new customers while they are improving their website ranking through search engine optimization and growing their following on social media.
5. Content Marketing
Content marketing is the process of creating engaging and valuable content for your ideal customer. Once the content is created, it is published on the website’s blog and can be promoted on social media. Content marketing helps to improve the website’s ranking, increases brand awareness and builds trust with your audience. Content marketing also includes ebooks, presentations, videos, checklists, white papers, infographics, and podcasts. In order for content marketing to be effective, the blog article needs to be properly optimized for keywords that are searched for by your ideal customers.
6. Email Marketing
It is one of the most effective marketing channels. It allows you to acquire new and stay in touch with your current customers. You can obtain emails when customers purchase from you or provide their emails on your website. Email Marketing allows you to remind your customers to come back to you to buy your product again.
7. Staffing Costs
That cost consists of employee salaries, commissions, bonuses, employer taxes, and benefits. Or, you can outsource your marketing to an agency which consists of an entire team of experts.
8. Traditional Marketing
It covers the costs of direct mail, TV, radio, and magazines. In this digital era, traditional marketing is still considered to be an effective technique to acquire new customers.
Marketing Budget Allocation
Now, that you know how to estimate your marketing budget and what expenses might be included in it, the next step is to figure out what marketing channels will be the most effective for your company. A marketing agency can help you to create a strategy that fits your goals and works best for your company.
5 Steps for Creating a Basic Marketing Budget and Plan
1. Set the Goals
In order to create an effective marketing strategy, you need to set your goals. It is vital to have a goal in mind to succeed in marketing. Goals should be timely, specific, attainable, measurable and relevant.
2. Define A Budget
The budget allows your company to stay focused and prioritize marketing activities.
3. Planning
After setting your goals and marketing budget, the next step is planning and determining which marketing channels and platforms will work best for your company. It also includes content and promotional calendar. Having a plan will allow your company to stay on track with your marketing efforts.
4. Testing
The key to effective marketing is testing and experimenting: what platform your ideal customers are using, what content do they enjoy the most, what is the most effective platform for advertising. A/B testing of your online campaigns can give you valuable insights into your marketing, so you can enhance your messaging.
5. Scaling Up
Once you know what works and what doesn’t, you can leverage your marketing budget to channels that produce the best ROI. Marketing budget should be continuously increasing. It should be aligned with your company’s growth.
Conclusion
There are numerous platforms, channels and marketing techniques today. Remember to stay focused and active with your marketing and your efforts will pay off.
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