Your marketing plan is essential for your team to know the goals and targets of your upcoming campaigns, but creating a realistic marketing budget can be challenging. You need to take into account a variety of costs, including reoccurring monthly costs and one-off expenses. Not only this, but you need to know what return on investment you expect to achieve, so you know if the methods you choose will be worth it.
It’s a lot to think about, especially if you’ve never created a budget before. The below guide will talk you through why you need a budget and what you should focus on when you do so.
What is a Marketing Budget?
A marketing budget is your team’s detailed map which shows exactly where you are spending money on whatever methods you choose. It could be a set amount you dedicate to trying link building, or it could be costs for Facebook ads. It is a highly crucial resource for each member of the business, ensuring they understand the overall marketing plan.
A marketing budget is ideally an annual plan, showing where you will be spending money each month, if not each week. With 2019 on the doorstep, there’s never been a better time to create a new marketing budget. Start the new year off right with an in-depth marketing budget in place.
Why Should You Create a Marketing Budget?
Marketing, if left unchecked, can run up a significant expense. There is a multitude of digital marketing disciplines for businesses to try, which can be costly. By creating a marketing budget and plan, you can ensure your business stays on target. Your marketing budget will not only show where you are spending money, but it should also indicate where you expect to make money, making it a realistic plan of action for the upcoming year.
Justifying Your Marketing Budget & Forecasting
If you are not the one setting the budget, it can be difficult to justify why you need the amount predicated allocated to each aspect. According to a HubSpot report, marketers who can show a return on investment (ROI) are 1.6 times more likely to receive a higher budget for their campaigns. Generating revenue is the ultimate goal, for whatever tactics you deploy, so being able to show precisely where you expect to achieve high revenue is critical to receive a realistic budget.
- Know what you’re spending: To be able to justify the budget amount you request, you need to know how much you are spending to the last penny. Vague costs are not enough. Every expense needs to be explored and covered within the budget, no matter how insignificant you believe it to be to the overall campaign.
- Understand your Key Performance Indicators (KPIs): Your KPIs are what you will measure to discover how successful your marketing efforts have been, so you need to understand them inside and out. Define and explore what your KPIs are before creating a marketing budget, and you will be able to pinpoint how each expense will affect each KPI. Doing so will help justify why you need that amount. KPIs could include:
- Customer retention
- Sales growth
- Organic traffic
- Landing page conversion rates
- Costs per lead
- Customer retention
Once you know exactly how to justify your marketing budget, you will need to convince those who hold the purse strings! Go into any meeting with your facts and figures clearly defined and know them like the back of your hand. Without these figures, you don’t stand a chance of showing that your marketing budget is both realistic and will bring the ROI you want.
Forecasting is a critical step to creating a marketing budget; it estimates how much revenue each method will achieve. It is, of course, impossible to predict what will make its mark significantly and what will fail, but when you are trying to justify your budget, forecasts are the figures which will back you up. There are a variety of different ways to forecast marketing budget accurately what you believe you will achieve, such as:
- The Extrapolation Method:
An incredibly simple method, where you work out your average daily spend, your average daily conversion, multiply the figures by how many days are left in the month, and you will discover how much you will spend and how many conversions it will bring you. Use an Excel document to keep track of this clearly.
- The Efficient Frontier Method:
Again, use Excel or online tools for this method. Instead of a table, this method creates a graph which pinpoints each expected ROI. It is a much more plausible forecast where you can quickly see exactly what you are spending each day, and how many conversions we will achieve.
Unfortunately, forecasting cannot take into account what might happen unexpectedly on any day. Perhaps your PC systems fail, and you cannot access your website for 24 hours. However, forecasting can accurately predict who and what will be affected most if the above scenarios happen.
Understanding Your Marketing Budget and ROI
Marketing is not an exact science. You cannot dedicate a set amount of budget to one aspect and rest assured it will bring in the desired ROI. However, ROI is an essential element of any budget.
Not every ROI in marketing is based in the financial world. ROI could include how many followers your brand’s Instagram account gets, how many email subscribers you get in a month, and how many people visit your site weekly.
A business will need to measure every marketing metric carefully to ensure they are achieving the desired ROI.
Dividing & Keeping Control of Your Marketing Budget
Dividing the marketing budget relies on the methods you opt for, including:
These aspects can be monthly reoccurring costs, such as social media marketing, or they could be annual costs, such as refreshing your website’s SEO strategy.
To divide each realistically (and reasonably), you will need to research the predicted ROI for each and discover what will be worth your efforts.
To ensure you stay in the black, it’s crucial your budget is adhered to, and your team knows where every penny is allocated. However tight you control your budget, it also needs to be somewhat fluid. As mentioned above, you cannot predict scenarios which could happen each day. If your marketing budget allocation states a specific expenditure for social media marketing, but you find you achieve your target much quicker, it’s vital you can adjust and change this aspect accordingly.
Marketing Budget in the Business Plan
Every business needs a specific business plan. It is, after all, a significant element for securing investors for any brand. Your marketing budget is an integral part of any plan. Marketing is a necessity to ensure every brand can grow and succeed, and as such, it also requires specific planning.
How Can We Help
Creating a realistic marketing budget, along with campaign strategies, can be a significant challenge. Luckily, at Relative Marketing, we understand each aspect of your budget and plan and can work with you to ensure every goal and target is aligned with your brand. Don’t hesitate to contact us today to discover how our full-service marketing agency can help your brand grow and succeed.