Many businesses make basic mistakes when building their marketing budget and it often leads to missed opportunities. Setting a marketing budget will help you keep your marketing efforts organised and structured, and ensure that you’re giving it the love it needs to help your business fly.
As your startup grows, you might be considering investing more time and funds into your marketing strategy. If building a marketing budget is completely new to you, don’t worry: we’ve put together a guide to help you become a budget-setting whizz.
What is a marketing budget?
Before we get started, you’ll need to learn what a marketing budget is and why you might need one. A marketing budget is an outline of costs your startup will spend on marketing efforts such as promotion of your brand, products or services.
Your marketing budget will cover all the expenses of your marketing strategy for a set period of time and should work hand in hand with your marketing strategy.
It should also look at what you hope to get in terms of return on investment, with clear goals and figures against which to measure the success of your marketing.
Why do I need a marketing budget?
Setting aside some funds for your marketing strategy is a crucial step for startups. As you’re just starting out, you’ll want to give your business the best chance of success.
A clear marketing plan will allow you to target the right people while the budget will allow you to produce the right content to target them with and help you reach a wider net of people who are interested in learning more about your services.
According to research by Alba SEO Services, new businesses allocate anywhere between 12-20% of their gross revenue on marketing. A marketing budget will help you plan and manage your marketing goals and overall costs, and keep you and your business organised.
What do I need to consider before setting a budget?
Before you get stuck into developing your marketing budget, here are some key considerations to take on board:
Determine your business goals
Before you begin thinking about how much you want to set aside for your marketing, you’ll need to lay the groundwork and plan out your business goals. You need to determine what you want to accomplish, so you can set a budget that allows you to achieve those goals.
Here’s some goals you could focus on:
- Create more sales
- Increase the number leads
- Earn more subscribers
- Drive brand awareness
When it comes to setting your goals, remember to be specific and set goals that are easily measurable to give your team something precise to achieve. Setting business goals will help you determine which marketing methods you should invest in to help you reach your goals and it’ll make budgeting a little more straightforward.
Establish your sales funnel
A sales funnel is the process your audience goes through to become a paying customer and it is a critical part of your marketing budget. Understanding your business’s sales funnel will help you determine where you may need your marketing strategy to help you keep people from falling out of the funnel.
Here are the stages of a sales funnel:
Awareness: At this stage, your audience becomes aware that they have a problem and they begin to look for solutions.This is when your audience becomes aware of you as a brand through ads or email campaigns.
Learning: At this stage, your audience will begin to look at options available to them. Your audience will be looking to learn more about your brand and what you have on offer to help them solve the problem.
Engaging: In the decision stage, your audience will start to narrow their focus on companies that provide the best solution or product for their problem.
Action: Once they reach the action stage, the audience chooses your business and becomes a customer.
Know your external costs
Before you begin allocating funds toward your marketing, you’ll need to determine your overall external costs, so you know how much money you can afford to put towards marketing. Here are the additional costs you should consider:
- Operational costs
- Costs of employing staff
- Costs of running your business
- Cost of any equipment
Research and understand your market
Before you begin your budget planning, you’ll need to research the market you’re about to head into. Start by doing a competitor analysis to see how your competition performs online. This will help you determine which strategies are important to budget for.
Once you determine how you stack up against the competition, you can establish which strategies you need to use to compete with them.
How do I set a marketing budget?
Now that you’re familiar with the key considerations, you can start planning out your marketing budget. It’s not as scary as it sounds but we’ll take you through it so you don’t have to do it alone.
1.Outline your marketing goals and objectives
When setting your marketing goals, your goals and objectives should be SMART. If you haven’t heard of the acronym before, here’s what it means:
- Specific – What is the goal?
- Measurable – How will I measure my progress?
- Attainable – Do I have the skills and the resources for it?
- Relevant – Why is this goal important?
- Time-bound – When will I achieve this goal I’ve set?
2. Understand your target audience
You’ll want to head into the market well prepared. Spend some time understanding your target audience, how they operate, where they spend their time and what makes them tick.
Understanding this will help you learn how your target audience will interact with your marketing – giving you a clear understanding of the goals you need to focus on and focus your budget on reaching them.
Here are some questions to ask yourself:
- How do my customers find my products or services online?
- Have I fully grasped their pain points?
- How many site visits do I get a month? How long are they spending on it? Is the content engaging enough? Is the user journey clear to them?
- What’s my cost per acquisition across my advertising campaigns?
- How many leads am I generating per month? How many are converting into customers?
- What’s the deciding factor for customers when it comes to selecting my business over my competitors?
3. Develop a marketing strategy
Your budget will depend on your marketing plan and what you’ve set out to achieve. It’s pretty essential, but if you’re not sure where to begin, check out our guide How to develop a marketing strategy for your startup to help you get started.
4. Choose the channels you want to use
This will depend on your audience and where they spend their time. Your marketing efforts should be focused and aligned with your business goals. You may want to focus your efforts on email or content marketing, or perhaps you want to develop your social channels. Research what your audience is influenced by and develop your strategy against these findings.
5. Estimate your marketing costs
You’ll now need to estimate the costs of your marketing efforts. It’s detrimental that your calculations are accurate because once your budget is approved and set, you’ll have to stick to it.
To help you develop an accurate projection of your budget, you can use marketing budget software to make it a little easier and less stressful. Here are a few options:
Once you’ve gone through these steps, you can start to put together your budget. Remember to align your budget with your marketing strategy as these go hand in hand. Your resources will have to align with a schedule to ensure your team has all the content they need on time.
What are some of the most common marketing budget mistakes?
Now that you know the ins and outs of setting up a marketing budget, we want to highlight some of the most common mistakes people make when developing their budgets, so that you can avoid doing the same.
Using channels that don’t provide a high return on investment (ROI): You need to determine which channels will work best for you and your brand, so you’re not allocating budget to channels that won’t drive revenue to your business.
You should track the return on investment of your strategies to ensure your budget goes to the campaigns that provide the highest return.
Not using data to your advantage: Remember to track and analyse campaign performance to ensure your budget is going to good use. If it’s not working, consider trying something different.
Not retaining customers: It costs a lot more to acquire new customers than nurturing existing ones. Allocate some of your budget towards retaining current customers and building customer loyalty.
Reusing your old marketing budget: Many businesses make this mistake. It’s important to understand that the needs and interests of your customer will change over time – and so will your campaign. You’ll need to analyse current marketing trends each time you develop your budget; don’t assume that what worked in the first year will work again!
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