One of the factors that determine the success of your marketing campaign is a well-set budget. The size of this budget can vary depending on many elements, including company size, business goals, marketing strategy, and target audience.
While some budget benchmarks exist, there isn't a straightforward formula that can help you determine the right marketing budget for your business.
Let's take a closer look at general guidelines to help you set a realistic budget for your marketing campaign.
Marketing goals are the pillars of any marketing campaign. They can also help determine your budget. By identifying the key goals, you can figure out which tactics will help you achieve them. This, in turn, gives you an understanding of how much you are likely to spend.
The time span of the marketing campaign can also affect the budget. If you are setting yearly goals and developing an annual marketing strategy, the budget will be different from budgets for 6-month or 5-year campaigns.
Analyzing your previous performance can provide valuable insight into the budget for your next campaign. By determining which tactics were effective, you can allocate more budget for them in the future. For example, if last year, radio advertising yielded a higher ROI than paid ads, you may want to consider spending more money on it this year.
If you don't have any marketing history or cannot determine the ROI of past tactics, that is completely okay! Consider shifting the focus to marketing objectives and the results of competitive analysis.
Know Your Target Audience
The type of tactics you choose for your campaign depends on the audience you are trying to attract, convert, and retain. By analyzing your audience and creating a robust buyer persona (or personas), you can figure out which tactics, channels, and efforts work best. This, in turn, can help you understand how much these efforts are likely to cost.
When identifying your target audience, consider reviewing industry blogs and resources as well as conducting market research.
When determining your marketing budget, check out what the competition is doing. How much are they spending on their successful campaigns? You can take advantage of blogs and market research to find approximate figures.
While budgets are unique for every business, reviewing these benchmarks can help you gain valuable insight into which direction your budget figure should be going.
Customer acquisition cost is the money your company spends to attract and convert a customer. By pinpointing this cost, you can figure out how to invest in marketing tactics that will help you achieve this conversion.
By dividing the customer's lifetime value (LTV) by CAC, you can get a return on investment. If the ROI is lower than you expected, then you may have to rethink the marketing budget.
Your marketing budget should be a percentage of your revenue. A common rule of thumb for B2C companies is to spend between 5% and 10% of revenue on marketing.
The best way to pinpoint this percentage if you do not have a marketing history is to research what your direct competitors are spending.
Some marketing channels require much higher investments than others. For example, email marketing is less expensive than social media advertising. By assessing which channels are best for reaching your target audience, you can understand how much these tactics cost.
You would have to allocate more resources for channels that yielded better results in the past or channels that contribute to the success of your competitors.
Your marketing efforts can depend on seasonality, economics, and industry trends. For example, you may need to allocate a higher budget for the winter holiday season. Meanwhile, an upcoming recession could introduce a change in your marketing plans.
Analyze the upcoming industry plans and economic situation to make sure your marketing budget accommodates them. This should include planning for emergencies and unexpected expenses.
Before setting the budget, you need to set clear metrics and KPI’s (key performance indicators) that can help you measure the effectiveness and ROI of your marketing campaign. Continuous analytics are key to catching issues with your tactics and fixing them before they hurt the entire strategy.
Adjusting the marketing strategy may involve rerouting resources from one channel to another or optimizing allocation within a specific set of tactics. While it is important to act on changes dynamically, you must remember that marketing results are rarely immediate. You may have to wait some time to understand how well your strategies are working. Frequent changes to the campaign can hinder consistency, confuse the audience, and hurt the budget.
Planning for emergencies, unexpected marketing results, and flexibility are an essential part of setting a marketing budget. Since your marketing plan isn't set in stone, you can change it according to the latest trends, customer feedback, analytics, economic fluctuations, and more.
Make sure to set up an "emergency marketing fund" so changes and adjustments don't come at the expense of the rest of the campaign.
Creating a robust marketing plan is essential to the success of your campaign. However, without a clear and realistic budget, it's easy to lose the opportunity to streamline your strategy and improve marketing results.
If you need assistance planning your budget, strategy, and ROI, a team of marketing experts from Mid-West Family South Bend can help. We can analyze your business and industry trends to help you build a strong yet flexible budget to support your campaign. For more information, please contact us at any convenient time.