Setting a marketing budget is one of the trickier and more frustrating parts of small business management. It’s also one of the most important. Set too little and it could mean a loss in sales. Set too much and it could mean another aspect of the business will have to be cut. Set no budget at all and one could quickly face a pile of marketing invoices that eat at money reserves meant to last all year.
The truth is that without some sort of marketing it is next to impossible to create business awareness which, of course, means few to no sales. In other words, for a business to grow, money must be spent on marketing. The trick is determining how much should be spent – and on what?
Building a Spaceship…
One of my first questions to any new client who asks about marketing options is, “what is your budget”? Often this question is followed by a lot of hemming and hawing, then a, “welllll……..” followed by a wished for low budget number. At times clients will punt the question back to me with the, “how much should I spend?”
For clients who struggle with or are reluctant to provide me with a range, I like to interject a little perspective by stating that, “I can give you a branded spaceship with enough budget… Is that what you had in mind?” Usually that gets the point across!
While I’m more than happy to suggest a budget to any client, I still need a range as only my client knows what budget his or her business can comfortably support before getting started.
Setting a Marketing Budget: Alleviating the Risks
The biggest barrier to setting a marketing budget is overcoming the fear associated with spending marketing dollars. Why is there fear? The honest answer is that there are no absolute guarantees that a marketing campaign will create an overnight success out of a company, making parting with hard-earned money all the more difficult. It would be easier with a surefire formula of $1 in marketing = $5 in sales, but a universal formula simply cannot exist. Variations in target audiences, marketplaces, buying seasons, economic influences, current brand awareness, and expenses within the marketing tools themselves combined make it impossible to create such a formula. Therefore, a seasoned marketer will use her own experiences and market data to develop a program with the best shot at awareness and high rewards.
Steps to Developing a Marketing Budget
With the above in mind, Step 1 to setting a budget with a chance at a return starts with understanding how a business fits within the marketplace and who it is trying to attract as a buyer. It is only with this information that a business can map out marketing activities and compare costs. In other words, the first step is developing a marketing strategy. A smart marketing strategy will provide options and prioritize activities that are in keeping with the business’s current goals and resources.
Step 2 involves calculating all the costs associated with the marketing strategy’s activities, priority or not. This is a tricky part of the budget process because most projects have multiple costs associated with their development and execution. A trade show, for example, could have many line items beyond a booth space registration, and a business will need to budget for each step or face a nasty financial surprise.
It’s tempting to look for ways to cut corners in Step 2, but sacrificing quality to save budget is a gamble. There are times when trimming the program makes sense (see 11 ways to waste money in marketing), but there are others when a lower price will actually cost more in the long run. An excellent example is launching a cheap, templated and un-responsive web site rather than spending a little more for a custom site that truly sells a business and embraces modern technology.
Once a business has a clear picture of its buyer, marketplace, and the costs associated with its marketing activities, it can then move to Step 3, comparing the data with its own business financials and other planned expenditures. If the marketing strategy suggests performing a priority activity at a traditionally low-revenue time of the year, then the business will need to plan in advance via its budget.
Step 4 is simply writing out the budget’s line items by calendar timeline and frequency. Typically this is done monthly and quarterly and lists each activity as its own line item.
By taking the time to plan out a marketing budget, a business will find itself with a solid plan of action based on real marketplace data and project costs. Surprises do happen, but having a budget will help keep the entire marketing program on track and in front of the right buyers.
Written by Bonnie Taylor, CCS Innovations, LLC’s Chief Marketing Strategist and author of the bestselling book, I Think I Need Marketing. Named one of 2014’s “Top 40 Digital Marketing Luminaries & Educators” by the Online Marketing Institute, Ms. Taylor has spent the last two decades focused on Strategic Marketing and has been instrumental in leading many small to mid-size businesses to growth awards and international expansion.