How to Allocate Your Marketing Budget
You’ve probably heard the rule that you should spend 70% of your marketing budget on things you know that work well, 20% of your budget on new strategies to help your business grow and 10% of your budget on experimental strategies. While this is a great guideline, it’s pretty general and doesn’t offer a whole lot of help with the nuts and bolts of allocating your budget. That’s why we’re going to walk you through an eight-step process for allocating and adjusting your marketing budget more precisely.
Set Your Marketing Goals for The Upcoming Year
When allocating your marketing budget for the new fiscal year, begin with setting your big-picture goals. Once you have those goals in place, make a separate list of all the marketing activities you did this past year and all the activities you hope to do in the coming year. Then try to make each activity to the relevant marketing goal. For example, a goal might be to grow your brand awareness, and an activity might be giving away corporate swag on social media. If you can’t connect a marketing activity to one of your big-picture goals, then you probably shouldn’t be allocating marketing budget to it.
Consider The Buyer Journey
In addition to setting your marketing goals, then you should also consider your typical buyer’s journey. For instance, if you sell an expensive, enterprise-level software product, then you probably need to target more money at the “discovery” phase of the sales funnel when compared to a D2C shoe brand where many consumers make an impulse purchase. By sorting the marketing activities into stages of the buyer journey, you will get a sense of where you can cut back your spending and where you might need to move more money.
Rank Your Goals by Priority
Now that you’ve set your big picture goals and considered the buyer’s journey, it’s time to rank your goals and their associated marketing activities by priority. Higher priority activities should receive more budget, while lower priority activities should see less budget. This step will keep you from pouring a bunch of money into a marketing goal or buying stage that isn’t a high priority for your company.
Go Over Last Year’s Expenditure
Now that you’ve looked forward into the future, it’s time to look back at your marketing spend over the past year. Review your actual spend (not the estimated budget) for the past 12 months and see how it stacks up against the marketing goals you have for next year. You might also want to compare the actual spend to the estimated spend to see if there are any areas where you spent way more or way less money than you planned to. This will help you get a better grasp on how much certain marketing activities cost so you can put together a more accurate budget for the following year.
Make A List of All Your Fixed Costs
Every marketing department has a certain amount of fixed costs. For instance, you might have a CRM software you love that costs a fixed amount for an annual subscription, an outside SEO agency that you pay a monthly retainer fee to or holiday corporate gifts for clients that you order from the same place every year. Make a list of all of these fixed costs and deduct them from your marketing budget. The remainder is what you have to allocate to all your variable costs activities according to the priority ranking you made in the previous steps.
Try To Estimate Hidden Costs
Every year, you need to leave some cushion in your budget for hidden or emergency costs. Things will inevitably crop up during the year that you can’t budget for ahead of time — a sudden rise in software pricing, hiring a PR agency to deal with a crisis, greater shipping costs on promotional products due to postal rate hikes and so on. Even if you can’t estimate what a likely marketing emergency would cost, you should still leave some extra in the budget so you have the cash to spend if you need it.
Measure The ROI As You Go
Once you’ve decided on your marketing budget for the year, the work isn’t over. You should track each marketing activity by its key performance indicators (KPIs), as well as the revenue that it generates for your company. This will help you measure your return on investment to see which marketing activities are paying off and which aren’t. Keep in mind that it may take a while to see the ROI with a brand-new initiative, so if you are trying something new, don’t be discouraged until you have at least several months of data.
Check In Frequently and Adjust as Necessary
Your marketing budget isn’t a static document; it’s as dynamic as your organization. To reflect your marketing activities, you should assess your spending monthly or quarterly and adjust where the money is going as necessary. For instance, if paid ads are doing less well than you thought they would, it might make sense to reallocate some of that money to another marketing activity that is performing better like promotional products. Making frequent adjustments through the year will help you be a smart spender and get the most effective results out of your marketing budget.
Allocating your marketing budget may feel like a daunting task, but it doesn’t have to be! Use this guide to break it down into manageable tasks that you can complete one step at a time. Give yourself plenty of time before your yearly budget is due so that you will be confident about your estimates for the coming year.