Marketing: Don’t Forget the Budget!
by Katy Dwyer
As the provider of marketing services, we are often asking the question, “What’s your budget?”
Every once in a while, we are met with an actual answer.
“We have $10,000.”
“Once our funding comes through, we’ll have a $75,000 budget.”
“Our budget for next year will be $150,000.”
More often than not, we are met with radio silence.
“I’m not sure what it should be.”
“I’m not sure what to expect.”
“I was hoping you could give me some guidance.”
But the least-helpful response we ever receive is “Forget about the budget.”
Talking about money is scary.
I get it… talking about money and thinking about money and dealing with anything around money can be scary or uncomfortable. When you are working for a business and you are in charge of the budget, maybe it’s a little less daunting. But when it’s your own business, or your own money, you feel protective of it. You may be guarded about sharing how much you have to work with. There are perfectly rational fears associated with discussing money, such as:
- Will my budget sound too low
- If I tell them my budget, I’ll wind up spending more that I would have had to
- If I tell them how much money I have, they will just spend it all
- If I share my budget, I will lose control over my business
- I’m not comfortable letting people know how much money I’m working with.
Why identifying a budget is important.
Yes, it’s scary to get transparent about your finances. But your budget is a very important piece of the puzzle when it comes to building a marketing plan. It helps to identify a number of things, such as:
- What type of advertising and media we can (or cannot) include in a plan
- What additions to a marketing plan may be a stretch to include
- Whether it will be important to spend time (rather than ad spend) on organic optimization
- How quickly you can expect a return on ad spend
- What kind of overall ROI we can reasonably expect
For instance, a 3-month marketing plan for a business with a $10,000 budget will look very different than the plan for a business with a $50,000 budget, and that plan will also look different if your business has a $250,000 budget, and so on.
Let’s say a business had a three-month $10,000 marketing budget to work with. While there are many other factors that must be considered (Who is the target audience? What is the required geographic reach? What is the goal of the campaign?), a small budget like that would likely only be able to support some paid digital advertising.
A $50,000 marketing budget over three months might also be able to include things such as direct mail, radio, video ads, and some OOH (out-of-home) advertising.
Finally, a $250,000 marketing budget over three months could potentially increase the number of mailings, radio spots, additional OOH advertising, and maybe even support some commercials. The reach of the paid digital advertising could be higher, and with more touch points, the return from this type of campaign may be greater and faster.
How to determine your marketing budget
“What should my marketing budget be?” is a common question. There isn’t one singular answer that fits every situation.
Some businesses will tie their marketing budget to their revenue, allocating a certain percentage of revenue (not profit!) to marketing per year. For instance, a $1M business may plan to budget 5 or 6 percent of their revenue to marketing, which would mean a $50,000 or $60,000 marketing budget for the year. There are different benchmarks for what that percentage should be depending on what industry you are in, as well as whether you are a B2B or B2C company. Those benchmarks can range anywhere from 1% all the way up to 20%+.
What if you aren’t a business with an active revenue? You may be a new business with limited funds or a start-up utilizing investor funding, bank loans, or other monies, not even expecting much by the way of revenue yet. This is the era of your business when your marketing budget will probably need to draw on an even larger percentage of your operating budget. When you are just getting started or in the early years of your business, you must create a solid foundation for your brand by investing heavily in marketing and developing brand recognition.
The goals of your marketing will also help determine what size of a marketing budget you will need or should plan for. For instance, if you ran a hyper-local brick-and-mortar business with no e-commerce, the expense to reach your target market will be much less than if you were a national chain or an international e-commerce business. The cost to reach consumers in a 20-mile radius is vastly different than reaching customers nation-wide because the strategies behind those goals would be completely different.
Also, don’t forget, your marketing budget likely won’t just be for things like the cost of placing ads, reserving billboards, or pay-per-click ads. You will need to also invest in a marketing agency, in-house marketing department, or a marketing consultant to help develop and execute these plans.
When you plan your next campaign, or are working out next year’s budget, remember to consider your marketing budget. It will be a key component to any marketer’s strategy, whether you are working internally or with an outside agency or partner. Having a clear answer to “What’s your budget?” will help your campaign or ongoing marketing be set up for success.
Ready to put your marketing dollars to work? Connect with us and we can help you form a strategy that will fit your budget!
Katy Dwyer is the President & Creative Director at Katy Dwyer Design. She has been working professionally in marketing and design agencies since 1999, and she started Katy Dwyer Design in 2009 to bring her creative and marketing experience to local businesses.