It can be difficult deciding on a marketing budget and figuring out exactly how to distribute marketing and advertisement funds. It is important to know that a marketing budget is really something that needs to be adjusted on a regular basis in order to account for the ebbs and flows of the work year.
Without paying close attention to a marketing budget, businesses, especially small businesses, can notice a really negative impact in their spending.
Below are some tips to help you establish and adjust your marketing budget, as well as some important platforms to pay attention to, so that you are getting the best ROI (return on investment) possible and really see the benefits of your budget.
1. Consider the Following:
- How established is your business? If you are a new business or you are not heavily recognized locally or in your industry at large, you need to spend more money on marketing up front to build business and establish yourself.
- What do your competitors spend? Getting an idea of industry-specific marketing spending and tactics is one of the ways you can be sure that you’re targeting the right spending percentage (more on that next).
- What is feasible and affordable? With so many ways to market online and make a name for yourself at low-cost, there is no reason to over-spend or spend excessively on marketing.
2. Percentage (%) of Sales!
There are a lot of different ways to set up and establish a marketing budget, but unfortunately, some of them are not effective because they don’t account for the dynamic impact that sales have. Using percentage of sales to determine your marketing budget allows you to avoid problems that come with fluctuating profit. By using percentage of sales, you are keeping your advertising consistent with what you are bringing in. When you hit a sales slump (as every business does) you are able to naturally decrease the amount you are spending on marketing in relation to what you are bringing in.
Let’s say for example your company brings in $14,000 one month, and $20,000 the next month. If you have a 5% marketing budget this means your ratio of spending will adjust accordingly – with $700 spent on marketing on month one and $1,000 spent on the next month. As you can see, this helps accommodate changes in sales and revenue.
In order to account for sales fluctuations, you can either use the percentage of past sales, the percentage of future sales or a combination of the two! Taking account of monthly finances is really the starting point and key to adjusting your marketing budget.
3. Allocate Budget Where You Need It
Another thing that is constantly changing over time is where you need to allocate a marketing budget. Some things stay pretty consistent as months go on, and others depend on the time of year, what your business needs most or what needs an additional push. Here is one breakdown of how you might allocate a marketing budget:
- Departmental Funds and Staffing
- Social Media Advertisement
- Premium Accounts (Industry Specific)
- Google Ad Words
- Print/photography/video visual media
- Email Marketing
This is just to provide some sense of the type of sources that marketing dollars need to be funneled in to. This is going to change a lot depending on your business. Some small businesses do not have a marketing-specific person or department, so they may not need to dedicate marketing money to this particular aspect. Other businesses might have a staff of 3-10 people in their marketing/advertising department. The point is that you will need to figure out exactly what you need to be spending money on and divide it accordingly once you figure out your overall budget based on percentage of sales. Some spending, like email marketing or staffing are pretty consistent. Others, like Google AdWords or Print media, might fluctuate greatly – and there may be some months you need to put more money into these areas specifically.
4. Analyze and See What is Actually Working
One of the most important components of a marketing budget is to do a regular analysis to see what is working and what is not. As I mentioned, there are some components of a marketing budget that are less flexible. The money that can be moved around should be moved in an informed way. For example, if you realize that you are getting a lot of traffic (based on Google Analytics data) on days that you boost Facebook posts and/or advertise on social media, this may be something that you want to spend more money on. Similarly, if you realize that you really need to have someone dedicating a full workweek of effort to marketing (in most cases, you do) then you may want to allocate some of your marketing budget to pay a marketing manager.
5. Develop a Marketing Plan
According to Kinesis, there are several important components of a marketing budget. Here are a few that you will definitely want to included in your annual marketing plan:
(1) Who: your target audience,
(2) Your unique selling point or what makes your company different,
(3) Marking channels and places you want to spend budget funds,
(4) Benefits to your company, and
In terms of execution, it is helpful to break down tasks and strategies down by week, but it's recommended to have your marketing budget be on a month-to-month basis. This will help you understand how and when to adjust your spending and respond the fluctuating rates of sales as they happen.
These are just five tips for adjusting your marketing budget and making sure that you are constantly staying on top of your ROI. You need to consider first where you stand as a business, how long you’ve been around and how well you are known in your industry. Then you need to define what percentage of your budget can go towards marketing and allocate those funds accordingly.
In order to have the most successful marketing budget, you also need to devise a long and short-term plan, to make sure you are staying proactive in reaching your goals. Checking in on a monthly basis will dramatically help with optimizing your marketing efforts! You can learn more about understanding your marketing budget by contacting our Marketing Agency, The Miami SEO Company.