Marketing budgets come in as many shapes and sizes as the campaigns they pay for — from organic social media posts to billboards in Times Square.
You don’t have to shell out millions for a Super Bowl ad spot or an A-list celebrity spokesperson to get a return on your marketing investment. What’s most important is understanding your market and the strategies that will spark the right kind of interest — and creating a realistic marketing budget that will achieve your goals without putting the brand’s financial health at risk.
The importance of a budget for marketers
Unless you’re happy with sitting back and relying solely on word of mouth to draw in new customers, a marketing budget is a must. It’s the key to planning and prioritizing promotional activities and ensuring your marketing initiatives align with business objectives.
A marketing budget helps you allocate resources efficiently so you can create a promotional budget that delivers measurable results. With a budget, you can set clear marketing goals, determine your target audience, and create campaigns that resonate with customers. It also allows you to measure the success of your marketing campaigns and adjust them as needed to achieve optimal results.
A good budget is also the first line of defense against company leaders who think of marketing as a nonessential luxury. When the economy gets shaky and finance departments start looking for ways to slash costs, a well-built promotional budget communicates how marketing can help keep the business afloat.
How to create a marketing budget
The first step to building a budget is creating a marketing plan to help you identify which areas benefit the most from investment. Follow these steps to create yours:
1. Research your industry and audience
Investing money into marketing without conducting market research is like shooting in the dark — if you hit anything, it will be thanks to luck, not strategy. Dedicating time and money to understanding your target audience, competitors’ strategies, and industry trends is vital to maximizing your return on marketing dollars.
Allocate enough in your budget to cover the costs of conducting surveys, focus groups, performance analytics, and other research activities. This will help ensure you’re reaching the right audience with the right message at the right time and place — which means you won’t be wasting money in the wrong places.
2. Identify your sales funnel
A household-name company won’t need to invest much in creating awareness since many people are already familiar with the brand. But for a younger company that’s less well known, you’ll need to delegate marketing resources to spread the word about what the business offers.
Ask yourself these questions:
- How do most customers discover your products?
- What information do they need before making a purchase?
- How many people visit your website each month?
- How many leads do you generate each month?
- How many leads convert into customers?
- How much revenue does each lead typically generate?
A clear understanding of the buyer’s journey and what the sales funnel looks like for your brand helps you map out a marketing strategy for each stage — and figure out which stage you should spend more money on. By analyzing each stage’s strengths, weaknesses, and performance, you can identify your most successful marketing tactics and allocate resources to the areas with the most impact.
You’ll also learn how much it’ll cost to acquire new customers, which can help you determine future budget allocations.
3. Determine your goals
Look at where your brand is now. Is most of your target audience still at the top of your sales funnel, or have you already created enough awareness that a juicy promotion might be all it takes to convert them to buy? Have you locked down one demographic and want to switch up your marketing to reach a new market segment? Asking questions like these will help you figure out where your brand is now and where you want to take it over the course of the fiscal year.
As you determine your goals, consider which marketing channels will help you reach them.
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4. Choose your marketing channels
The marketing channels you choose will play a significant role in determining what type of budget you’ll need. Here are some channels worth considering:
For the vast majority of businesses, a good website is nonnegotiable. A website isn’t just a place for showcasing products or services — it’s visitors’ first impression of your brand. If your website loads slowly, isn’t optimized for mobile and tablet devices, and delivers a frustrating user experience, it can drive customers away, doing more harm than good.
Investing in a high-quality website doesn’t just improve your brand perception — it allows you to engage and interact with existing and potential customers. And you can gather valuable data on your audience’s behavior and preferences to inform future marketing strategies. Website analytics can help you determine which strategies are working and which channels bring the most customers to your site, giving you the insights you need to shift your budget and put more money into the things that actually work.
If your brand doesn’t have a website yet, Webflow offers a collection of templates to help you get started.
Search engine optimization (SEO) is one of the most effective digital marketing tools. You can improve the business’s ranking on search engine results pages (SERPs) by optimizing a website’s content and structure to include relevant keywords and phrases. Devoting resources to SEO will increase web traffic, brand awareness, and credibility, likely resulting in an uptick in leads and conversions.
Whether on Facebook, Instagram, Twitter, LinkedIn, TikTok, YouTube, or all of the above, social media posts and ads are perfect for reaching specific audiences, building brand awareness, and driving traffic to your website. Social media platforms also offer sophisticated analytics tools, allowing you to track and fine-tune your marketing efforts and budget.
Social media marketing also allows you to communicate with customers in real time and build a sense of community around the brand.
Blog posts, videos, podcasts, and infographics all fall within content marketing, a highly useful way for businesses to attract and engage a target audience. Producing high-quality, informative content that provides value to your audience will help you capture their attention and establish your brand as a trusted expert in your industry.
Content marketing is also good for generating leads. Offering valuable content such as guides, white papers, and ebooks in exchange for contact information can help you build an email list of potential leads you can nurture later.
You can take content marketing further by incorporating SEO keywords into your content and sharing it on your website and social media channels. Getting your valuable and share worthy content in front of more people helps move more potential customers one step further down your sales funnel.
Email marketing — which can include newsletters, product launches, sales, and other brand announcements — is a powerful and cost-conscious marketing tool. It’s a great way to stay in contact with a large audience and provides valuable metrics on their behavior, preferences, and engagement. Use these insights to refine your marketing strategies and improve results over time.
You can also personalize messages, like sending a discount code on recipients’ birthdays, which will help nurture relationships with existing customers and convert interested people into buyers.
5. Monitor costs and return on investment
Include room in your marketing budget for analytics tools to track the effectiveness of your website, SEO, social media, email marketing, and other channels. Keep in mind it can take time to collect this info. Until you have years of data to inform your decisions, your strategies and budgeting will likely involve trial and error.
But if you track how well your marketing efforts perform and how the actual cost compares to the amount you’ve budgeted, you’ll have a clear understanding of your return on investment, which will help you refine future budgets and decide which marketing strategies to keep and which to toss.
How much should you spend?
There’s no perfect marketing budget percentage that every company should aim for — a lot will depend on the industry and the business’s needs. If you’re marketing for a startup or small business, for example, you may need to allocate more funds to building brand awareness and attracting new customers. Or you may need to focus on cost-effective strategies or build up only a few channels at a time if your budget is limited.
The U.S. Small Business Administration typically recommends that small businesses spend between 7–8% of gross revenue on their marketing budget. Other marketing experts, though, recommend up to 20% if you’re in a particularly competitive industry. Whatever number you land on, make sure you’re monitoring costs and performance analytics so that you can put together an even more effective budget the following year.
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