7 Tips for Setting Your Marketing Budget
If boxing is the sweet science, then maybe marketing, given its unpredictability, is the sweet-and-sour science. Or perhaps it’s more like fuzzy math. No matter. Your small business needs marketing. It must be done, no matter how tedious or difficult you find its associated tasks.
The first crucial step is setting a budget. A one-size-fits-all approach won’t work, because every business has different needs and the marketing landscape is constantly shifting. So, here are seven tips for creating a marketing budget that can really work for your company.
- Take a holistic approach. “It’s not just about the money,” says Jeanne Hopkins, senior vice president and chief marketing officer at Continuum Managed Services. “It’s about the actual time to plan and execute the program you are spending money against. Many times, the idea sounds great, but if you don’t have the person to create the right value proposition and turn it into a creative format that will generate demand, it is pointless to just throw a bunch of budget away.”
- Define your objectives. This is key, says Pete Hayes, principal at the consulting firm Chief Outsiders. “Much has to do with the stage of the product or company. Younger companies and new product introductions may need to spend disproportionately.” Your objectives as a young company may be to build awareness and so, budgeting for a social media campaign on Facebook may be prudent. If you're launching a new product, you may want to fund a number of marketing initiatives, such as online ads, direct mail, print, broadcast media, in-store promotions, or events to make the market aware of your latest offering.
- Consider the complexity of your offering. The complexity of your products or services and how they’re sold should factor into your marketing budget. “Spending monies to arm your sales force or channel partners [with materials] can be a major factor [in determining budgets],” Hayes says.
- Factor in existing relationships. Take your longevity in the marketplace into account, Hayes advises. Many businesses have the opportunity to extend existing customer relationships beyond the initial sale. Make sure to budget for marketing efforts that encourage and enable referrals and repeat purchases. For example, perhaps a customer loyalty program is in order. “Rewarding a current customer for staying a customer (bonus points, discounts, special offers) is usually less expensive than trying to convince non-customers to buy your product or service,” Hopkins notes.
- Choose and test a strategy. If you maintain a website and digital marketing is important, Hopkins recommends budgeting for online efforts. If not, think about spending your money elsewhere. “Events and direct mail are underutilized vehicles, and sometimes it is exactly those programs that help you stand out from the crowd,” she notes. Hayes adds: “There’s no rule of thumb. We’ve found that any given mix is not stable. Invest where testing exhibits results and develop new channels by continuously testing. Monitor weekly and adjust monthly.”
- Identify customer needs. “Start with the customer,” Hopkins advises. “How do your customers buy from you? Online, by phone, or face-to-face from a salesperson? Once you’re out where the buying process begins, then you can apply the right marketing tactic to leverage that buyer persona and their journey toward becoming a customer of your business.”
- Look for a return on your investment. “Generally,” Hayes says, “marketing budgets range from 3 to 12 percent of revenues,” but your objectives may suggest otherwise. Other factors, such as the introduction of a new product or service, may also influence how much money to set aside for marketing. “Look for the best ROI,” Hopkins suggests.
Whatever you decide, review your data constantly, these experts concur. “Figure out why people become customers and why they do not,” Hopkins says. “Try to learn where they go when they stop being your customer. Those are the things that will inform your marketing program more than a new logo or design will ever do.”