“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” – John Wanamaker
Whether you’re a marketer working for a large multi-national corporation or an early-stage startup, you are aware that the marketing budget is increasingly under scrutiny.
One of the biggest marketing challenges is being able to justify your marketing spend for the future and then allocating your budget judiciously.
Gone are the days when you could adopt a “spray-and-pray” approach to your marketing spend. Today’s marketer needs to make complex decisions on what programs goes into the marketing budget, how to deploy the budget and finally, how to extract the maximum return on investment.
So how can you address this challenge and define your marketing budget?
Budget Cuts: You are not alone
The tightening of marketing budgets is not unique to any particular industry or company. It affects everyone.
Here are some examples on how others are tackling the budget issue:
- Unilever Will ‘Zero Base’ Marketing Budgets in Belt Tightening Move
- Big Spenders on a Budget: What the Top 200 U.S. Advertisers Are Doing to Spend Smarter
- MAS slashes marketing budget; unveils plans for ‘assisted digital’ guidance service
- Tourism marketing to make do with 45% cut in FY16
If you have read the stories (listed above and others elsewhere), you will realize that the mantra is to spend smart and bet on digital.
So what considerations should go into making a marketing budget?
What goes into a Marketing budget?
Here are some of the points to note while drawing up your budget:
- Campaigns: What campaigns do you plan to run for the year? How many campaigns? Would you like to run it globally or locally? Should it be digital or ads or others?
- Channels: What channels are most relevant for your business? Which channels do you want to launch your campaign on? Where do you want to run your paid campaigns?
- Contacts: What is the current volume of contacts? What is the planned rate of increase in your contacts (entering various stages of the funnel during a certain period of time)?
- Content: What type of content is relevant for your business and what has performed well in the past? Do you want to build the content yourself or outsource production? Should the content include text, videos, or some combination of the two?
- Funnel: What is the estimated volume of contacts thru your funnel? What are the expected conversion rates by stage? What programs are needed to drive the funnel conversion? Should it be driven inhouse or outsourced or both?
- Revenue: What is the planned revenue – by geo, by segment? Where is the potential ‘bang for the buck’?
Most of the budget considerations would typically fall within one of the above categories. Capture these points and address them in the context of your business. You should now have a high-level set of items to use for the next step in your budgeting exercise.
What drives the actual numbers in your budget?
After you’ve identified the various marketing programs that go into your budget, you need to determine the actual numbers for each program on your list.
Your marketing programs should be governed by what you want to achieve. So this leads to measuring metrics. You should focus on business metrics and ignore “vanity” metrics such as clicks, views, and others.
“In one of the key findings, the top metrics being used by marketers to measure customer experience successes are directly tied to business outcomes. The No. 1 metric is retention-rate improvement (cited by 69% of respondents), and No. 2 is acquisition-rate improvement (62%).” – CMO Council Study
The goal is to make sure that every marketing dollar helps you drive closer to your expected return in terms of new leads, conversions, revenue etc.
Wrapping It Up
Figuring out your Marketing budget is a daunting task, but one of the key requirements is being able to measure and manage the right metrics.
It’s easy to get distracted by vanity metrics and lose focus on business outcomes. So rather than wasting time managing data, adopt a marketing analytics solution that delivers actionable insights to you. Evaluate your needs, options, best case scenarios and then plan your budget based on hard metrics.
This can help you lay the foundation for a strong marketing plan and subsequently a viable marketing budget.