If you run your business profitably, you need proper planning and execution of a marketing budget. A marketing budget plan should detail your willingness to spend on different marketing activities during a certain period.

Planning your marketing budget is easier when you know the variables that will impact your financial goals. You need to understand the costs associated with different activities and determine whether they are worth your time and money. 

For instance, would it be cheaper to send email newsletters or schedule a Facebook ad campaign? What’s the ROI of each activity? A well-organized marketing budget will give you these answers. 

Here is a detailed guide covering everything you need to know before you start developing your first marketing budget plan.

What is a Marketing Budget?

A marketing budget is the overall estimation of the total amount of money a company plans to spend on various marketing activities in a quarter or year. By “marketing activities” we mean promotions, public relations, digital marketing, advertisements, social media marketing, and so on. 

A marketing budget can also cover costs for marketing automation tools, new marketing hires, social media tools and services, and additional marketing employees.

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Reasons Why You Should Create A Marketing Budget

There are several reasons why you should create a marketing budget. It can help you keep track of your spending, set goals, measure your success, and more. 

Let’s dive deep into them and understand them better.

1. It helps you to be on track financially

A marketing budget plan helps you stay on track financially because it lets you know your costs and how much money is being spent on different activities.

It also helps keep your business goals in perspective because it lets you understand what you need to focus on or give priority to, depending on the time frame of your campaign.

2. It lets you allocate funds to the right places

Having a marketing budget planned allows you to invest in the right places. After you have made a marketing strategy and decided the channels to use for marketing, you can choose how much to spend on which source so that your overall marketing campaign is a success.

Creating a marketing budget can also help you to allocate your resources more effectively. By knowing how much you have to spend on marketing, you can ensure that you are using your resources in the most efficient way possible.

3.  It helps you set practical goals

It is essential to set realistic and attainable goals for your business marketing strategies is essential. With a properly planned budget, you can focus on the appropriate strategies that can work for your business. 

It can also let you understand what strategies will work for you and what will not, thus giving you a clear picture of how much to invest in each channel and the ROI to expect from it.

4. It helps you plan the long-term game

Marketing isn’t a one-day thing. All your strategies take time and consistent efforts to yield positive results. Thus, marketing strategies are created aiming for long gun growth and success. 

Setting up a marketing budget plan for 2022 ahead of time will give you a clear and certain picture of your long-term plan and will also prevent additional spending from sudden decisions. 

Whatever your marketing strategy or budget is, both should be flexible and align together so that you can make changes whenever things aren’t working as planned.

5. It’s an investment in your business

If you consider a marketing budget an extra cost for your business, you need to change your thinking. Marketing is not an expense; rather, it’s an investment.

Marketing generates more sales and revenue, thus boosting the overall business growth. Hence, a marketing budget should always be viewed as an investment in the growth and success of your business.

Overall, a marketing budget plan is a helpful tool that can assist you in achieving your marketing goals. It is worth taking the time to create a budget and stick to it.

How To Determine Your Marketing Budget?

The 2021 CMO Survey says that organizations spend between 10.4% and 13.7% of their total company budget on marketing, although the number differs for different industries. This data can help you decide your total budget and how you should allocate it. Further, you can use various other methods to decide on the perfect marketing budget for your business.

Percentage of revenue

One of the most convenient ways for businesses to decide the marketing budget is to allocate a certain percentage of their revenue to the marketing overhead. 

It is generally observed that businesses allocate approx around 7 to 12 percent of their total revenue to marketing. It helps businesses to maintain a balance between revenue and expense so that they do not end up overspending. In this case, the budget is not fixed to a particular amount but varies depending upon the revenue generated.

Fixed Budgets

Unlike the percentage of revenue method, here, the marketing budget is fixed to a certain amount which seems affordable to the business. Setting a fixed target makes it easy to structure the marketing plan. But deciding on a fixed budget is a tough job. You can research your competitor’s budget to get an idea of that.

Return on Investment

Return on Investment (commonly referred to as ROI), in simple words, is the return that you get by investing your capital fund into the business. This approach is more rational than the others because you first analyze the return you are getting by investing in marketing overheads. An analysis of return on investment is done before deciding on the next marketing budget to ensure the efficient utilization of the money.

How to Allocate Your Marketing Budget?

Planning a marketing budget for your business is a responsible task. It needs careful observation and mindful decisions to construct a marketing plan with a finite budget to generate maximum ROI.  

As per reports of Econsultancy, marketing budgets have been rising since 2011. With the option to spend huge chunks on different marketing channels, businesses often make wrong decisions and lose and spend their money.

However, you can allocate your marketing budget thoughtfully by understanding your business objectives and following some steps.

Set S.M.A.R.T. marketing goals

Your marketing goals are the endpoints of your marketing plan. Knowing your goals will help you keep your expectations realistic. It’ll also help you evaluate your campaigns.

If your marketing goals aren’t realistic, you risk wasting your marketing budget. For example, let’s say that you want to increase revenue by 10% next year. Calculate your expected revenue and revenue growth rate.

Do the same for your revenue and profit. Once you have these results, you can set a marketing goal to increase by 10%.

Make a plan for the entire year

The marketing plan is where you’ll list all your planned marketing efforts for the year. You can write it down or put it into a notebook or spreadsheet program. 

If you’re using a note or spreadsheet program, keep track of when you made the plan, when you updated it, and what’s still left to be done. This will help you keep track of when things are due and will help you keep track of what’s left to be done if something comes up.

Estimate expected costs and ROI

The marketing campaign cost and return on investment (ROI) are two important factors you’ll need to know when allocating your marketing budget. These calculations will help you decide what marketing methods will get you the biggest return on investment.

To calculate the expected cost of your marketing campaign, you’ll need to know the expected revenue of each campaign. You can find this information in your marketing plan. You can also find it by calculating the expected revenue, revenue growth rate, and profit margin. 

To calculate the ROI of your marketing efforts, you’ll need to determine each campaign’s expected revenue and the percentage you’ll receive.

Allocate your spending

Once you have your budget and a marketing plan, it’s time to start allocating your budget to different channels. This will be based on the expected cost of each campaign and the percentage that you’ll receive for each campaign.

For example, let’s say you’ll have a budget of $50,000 for the year and use $20,000 for paid marketing and $30,000 for earned media. To start, you’ll need to create a spreadsheet or a chart showing each campaign’s expected cost and the percentage you’ll receive for each campaign.

The chart or spreadsheet will help you track which campaigns are allocated to which table or column. Once you’ve created the chart or spreadsheet, it’s time to allocate your spending. 

The first step in allocating your spending is to figure out how much you have left after you’ve accounted for paid marketing, earned media, and the cost of running your company. Keep track of this amount and ensure it’s enough to cover all your expenses. 

Once you’ve accounted for all your expenses, you can start allocating your remaining budget. The best way to do this is to start with the biggest expenses and work your way down to the smallest expenses.

Keep track of your campaigns and modify your strategy

Make sure to keep track of your campaigns, especially if you’re using a lead generation method that’s based on a certain number of leads. You’ll need to keep track of how many leads you’re generating and when you’ll be closing on leads.

You’ll also want to keep track of your campaign results. This will help you ensure that you’re conducting the right campaigns and that your investments are worth it.

6 Easy and Simple Steps to Create Your First Marketing Budget  

Marketing is crucial to the success of any business. It’s a key way to build brand recognition and create demand for your product or service. You can use the steps below to decide how to create your marketing budget plan.

1. Understand your buyer’s journey

It’s important to know who your customer is and what their needs and challenges are. If you don’t know who you are selling to, you’ll sell to the wrong people. You’ll waste time and money.

It’s particularly critical to know where your potential customers are in their buying journey is critical. Knowing this will help you identify potential customers and see where your marketing efforts will be most effective. 

2. Define your business goals

Next, you need to set your business goals. Why are you doing this marketing? What do you want to achieve? Keep in mind that the main goal of marketing is to increase the sales of your products or services. Marketing is how you are going to achieve this goal. Your goals should be specific, measurable, and time-based.

3. Set up a marketing budget

Once you know your customers and what you want to achieve with your marketing, you can set up a budget. This budget should be based on your business goals and the needs of your target market. You can use a spreadsheet to calculate the budget.

The budget should include all the costs of marketing: the cost of the software and other tools you will use, the cost of the marketing materials you will use and the salary of someone who will manage the budget,  and any other costs related to marketing.

4. Get an idea of what strategies you want to use

Once you have your marketing budget, you can start implementing strategies. Certain strategies you can use to set up your marketing budget will help you get an idea of what strategies you want to use. 

5. Keep in mind your top priorities

There will be a lot of things in the course of your marketing that you would like to do that demand extra spending, but you need to be sure about your priorities. Otherwise, you will end up overspending.

A simple example is the premium versions of numerous tools. Though they are good to have, they aren’t mandatory. You may continue with the free version and still get results.

Thus, it is effective to analyze your spending and the results obtained from it to understand whether it needs to be a part of your budget or not.

6. Prepare to calculate ROI

Before jumping into the implementation stage, it is important to prepare your organization. You need to set up a measurement system that includes measuring the success of your marketing strategies and the investment you are making in them. You can set up a measurement system in a few different ways.

You can create a marketing dashboard and collect data from different dashboards. You can also use marketing software that comes with a dashboard system. These will give you the data you need to make smart decisions on your marketing strategies and investments. 

You can then set up a measurement system that will help you identify your marketing strategies’ success and the associated costs.

How to Analyze and Optimize Your Marketing Budget for Better ROI 

• Analyze your marketing spending for the last year to get an idea of where your money is going. Break down your spending by category, such as advertising, events, etc.

• Once you understand where your money is being spent, you can start to look for areas where you can cut back or optimize your spending. For example, if you are spending a lot on advertising but not seeing a good return on investment, you may want to cut back on that category.

• After you have analyzed and optimized your budget, create a plan for the upcoming year. Make sure to allocate adequate funding for each category to achieve your marketing goals.

• Monitor your budget throughout the year and make adjustments as needed. This will help you ensure you get the most bang for your buck and achieve the best ROI possible.

Final Thoughts

Now that you know how to create your marketing budget, you can start creating your strategy for boosting sales in your business. Start by setting up a marketing budget, knowing your customers’ buying journey, and defining your business goals. With these steps, you’ll be able to create a marketing budget and boost sales in your business.

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