Setting a realistic marketing budget is a vital step in growing your business, although many organisations still find the task overwhelming.
Organisations of all sizes struggle to find the sweet spot between investing too little or too much in their marketing activities.
Striking the wrong balance can lead to an under-resourced marketing strategy that fails to deliver actual business growth, or overspending on a plan that wastes money that could have been better spent elsewhere.
Working out the size and shape of an effective marketing budget depends on what stage your company is at, as well as your business priorities.
While there is no reliable cookie-cutter model out there for setting a marketing budget, there are some factors to consider that can help you reach a figure that works for your business.
Setting a budget
The first thing to do is forecast your annual revenue for the coming year to determine how much to set aside for your marketing budget.
You should speak with your finance manager to get an estimate of your business’ gross revenue — a figure that will be based on revenues from previous years, plus potential variables for the year ahead.
The next step is to assess what stage your business is at.
Unlike established businesses, new organisations generally need to allocate a higher percentage of their revenue to marketing activities to grow brand awareness and compete with older, better-known players.
As a guide, start-ups should allocate between 12 and 20 per cent of their gross revenue to marketing, according to American digital strategist and author Ryan Flannagan.
As companies build up their brands and develop customer loyalty over time, they can adjust how much of their overall revenue they dedicate to marketing.
More established companies should spend between six and 12 per cent of their revenue to reinforce brand awareness and increase their reach.
Once you confirm a budget, you can then work out which marketing activities will work best for your business, whether it’s through branding, social media, advertising, content or a website.
How does your marketing budget stack up?
Bare minimum (Bronze)
New businesses: <12% of gross revenue.
Established businesses: <6% of gross revenue.
Branding: Online marketplaces like 99Designs.
Website: Do-it-yourself website builders like Squarespace or Wix.
Social media: Do it yourself or bring in an intern.
Advertising: Tell your friends and family, network, hand out home-made flyers.
Content: Create it yourself.
Good (Silver)
New businesses: 12% – 16% of gross revenue.
Established businesses: 6% – 9% of gross revenue.
Branding: An agency or freelancer can work with you to develop logos, business cards, brochures etc.
Website: An off-the-shelf website template, modified by an agency or freelancer, to include your branding, simple reporting capabilities and search engine optimisation (SEO).
Social media: An agency or in-house team can create regular posts, monitor accounts and respond to customers.
Advertising: An ad hoc approach to print and press advertising, tradeshows, direct mail, email newsletters, digital and social media ads etc.
Content: An agency can work with your business to produce articles, photography and simple videos.
Best (Gold)
NeNew businesses: 16% – 20% of gross revenue.
Established businesses: 9% – 12% of gross revenue.
Branding: Undertake a branding workshop with an agency to determine demographics and psychographics for your buying audience. Research your audience, competitors and marketplace. Develop a holistic approach to branding, covering all customer touchpoints.
Website: A highly-effective website with detailed reporting, integration with a CRM and marketing automation tools, with a focus on user experience and conversions, and supported by SEO.
Social media: A social media strategy that fully integrates with business goals, advertising campaigns and branding. Tailored content is created for use on several social media platforms, comprehensive monitoring and reporting, with social media advertising to increase reach.
Advertising: Develop a 12-month marketing calendar to meet real business objectives. Run regular activities as well as bigger campaigns that support key promotions. Detailed reporting will measure campaigns against KPIs to inform and improve future advertising.
Content: Develop a strategic content marketing plan to meet business objectives, and create a mix of written articles, videos, photography, infographics, podcasts, print products etc.
Review and renew
Just like you monitor the effectiveness of your marketing activity, you should review your marketing budget periodically.
Businesses will benefit from adapting their budgets during different stages, whether it’s increasing spend during growth phases or consolidating activities to cut costs.
The most important point is to avoid halting your marketing activities altogether.
When you put the brakes on a marketing strategy, it compromises your data and undermines insights like where your marketing is working best.
The next step
If you’re still not sure how much to spend, you should seek advice from an expert.
A reputable agency can help you land on a figure that’s right for your business rather than overselling a strategy that you cannot afford.
Assemblo is a full-service marketing agency based in Melbourne, offering a range of expertise with a focus on results-driven strategies to help businesses grow.
Assemblo can help with a single aspect of your marketing plan or oversee an entire strategy and act like an outsourced marketing department.
To find out how we can help your business grow, give us a call on (03) 9079 2555 or drop us a note via our contact form below.