Establishing Your Marketing Budget

Clients often ask us, “How should we set our marketing budget?”  And while we wish there was a simple answer, the reality is that there are a million different ways to set a marketing budget. Whether you take a simple approach like allocating a percentage of your sales toward marketing or a more complex approach like trying to accurately project all your planned marketing activities and the estimated costs, we prefer to take a step even further back when it comes to setting an annual marketing budget.When it comes to any project, including creating a marketing budget, we believe in starting with our DISCOVER phase. In this case, the questions that we look to answer prior to setting a marketing budget include:• Where are we in the product or service life cycle? Are we trying to launch a brand-new product or are we supporting a well-established product or service?• What is our industry norm when it comes to marketing support? There are often statistics you can obtain to answer this question.• What is our direct competition doing, what tools are they using, and what do we estimate that they allocate to marketing?• What are our goals for the next year? Major growth or sustained sales? New customer acquisition or current customer retention?• What is our funding? What can we realistically afford to put toward our marketing efforts next year?We have found that the time and energy spent answering these questions in the DISCOVER phase pays dividends in the resulting budget.The other items we touch on during DISCOVER are less traditional expenses. It’s easy to remember the outward facing marketing activities like promotions, advertising, sponsorships, digital ads, etc. But it is just as important to include the supporting efforts like brochures, design, photography, printing, copywriting and postage. It does no good to include the cost of a tradeshow if you don’t budget for the materials you need at the show or even the travel costs to get there. It’s also important to include dollars for things like research and continued education that you might need during the year. One way to make sure you capture these items is to create buckets for different types of marketing activities and any associated support items.We also encourage our clients to plan for the unexpected. The world of marketing is changing rapidly; new opportunities and tools seem to pop up every day. If it is at all possible, it is great to create a special fund that you can use to take advantage of that unexpected PR opportunity or a new digital tool that your competitors are using.More than anything we encourage our clients to constantly review and adjust their marketing budget. Often the overall number is committed for the year but within that total dollar amount is room to adjust as needed. If you budgeted 20% of your budget toward digital marketing, but you are seeing it take-off and drive sales, be ready to pull dollars from another area. A marketing budget shouldn’t be something that sits on your shelf all year. Rather it should be a living and breathing document that you use to maximize your spend and drive your sales.