How to Set Up Your Entire Marketing Budget

How to Set Up Your Entire Marketing Budget


For any business, capturing new customers and expanding business reach is the main target for their marketers. However, doing so involves getting the word out about your product and your company. This is a dilemma all to itself and to the marketers tasked to do so.

“It takes money to make money” is an all-too-familiar phrase that is simple and yet can get complicated. Marketing a product or brand involves processes that not only needs material resources but also time and effort. All of which amount to at least something. Bottom line is marketing involves costs, and as a marketer you need to be wary of the costs and be able to justify the costs with the results of your marketing activities.

A solid and well-planned marketing budget is therefore essential to every marketing plan and the contribution to the success of that plan.

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Why Marketing Matters

Most companies build their businesses through relationships with individuals or companies who place value in the products or services that you are giving. And as such, marketing is very much needed in reaching that goal of creating interest and awareness of your product or service. Marketing is that first step to connecting with your customers, a prime mover to building that customer relationship.

  • Marketing outlines clear and strategic objectives – A clear strategy sets your direction and goals. Having clear and measurable goals help measure and gauge the success of your marketing efforts. Increased opportunities ultimately lead to sales or revenue. Marketing is the tool used in converting a plan to completion or success.
  • Awareness is uniqueness – Marketing demands uniqueness. Now the challenge is in creating that uniqueness in the minds of the customer through awareness of your product. Helping customers make a clear choice in selecting your product befitting their needs is a role marketing plays to every other Joe or José who comes across your brand.
  • Your customers define your success – Picture this—no matter how much you market your product, if there are no customers who are willing to give you money for your product or service, how do you think you are going to get sales and earn revenue? To put it simply, if no one is willing to give their hard-earned moolah for anything you are selling then you might as well be giving them out for free. And if that still does not work, then may the good God bless your soul. Your business is destined to meet its maker sooner rather than later.

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Having established marketing as an essential for any business brings us to our next question…

What Is a Marketing Budget?

Marketing budget is your marketing plan translated into cost. It is an account of possible expenses to be incurred in the execution of the activities involved in the marketing plan. It is a crucial requisite to the whole marketing process. Working on a budget sets goals and targets and helps increase the focus of all the individuals involved in the process.

What Should Be in a Marketing Budget?

Getting the most out of your marketing budget should mean that all expenses involved are straight out covering only marketing expenses. Since sales and marketing are so closely intertwined, it is important to make a clear distinction between the two if you have different staff working per department.

The following should be included in your marketing budget:

  • Marketing material – Marketing materials cover advertising brochures, product catalogs, freebies such as T-shirts, mugs or pens, and other such items designed to get the word out about your company and the products or services it is offering.
  • Production costs – Are costs related in making any design, art, and photography related to advertising of your product or brand.
  • Technology costs – Technology costs relate to costs involved with website creation and the maintenance of such.
  • Paid advertising – Any advertisements posted or run in newspapers, magazines, TV, radio, and direct mail campaigns. Online advertising such as video and banner ads, email marketing, pay-per-click ads, blogs, and content marketing.

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Four Marketing Budget Methods

Now, there are typically four marketing budget methods that you can use in your marketing efforts. Note that these methods can be used in conjunction with each other or a general mix of all of them. It is entirely up to you in how you combine the different methods to get the most advantage.

  • Competition-effort matching – As one popular saying would go: if you can’t beat them, then join them. Once you’ve narrowed down a good competitor in the market, it may give you ideas on how he markets his products. From the moment we opened our eyes to this world, our first method of learning was always through imitation. Try to see what kind of marketing works for your competition and try it yourself. It may work well for you as well.
  • From the top-down – As the word suggests, the person in charge of finances or the CFO of your company gets to decide how much budget will be allocated to marketing. Do pray that allocation would fit nicely to your marketing plans, which should be reviewed by them as well anyway.
  • Percentage of sales – This is a great option where there exists no sales records or for startup businesses. Spending on a percentage of what you are making is a good option to take. Statistics show a popular 10% of sales should be spent on marketing. Still entirely dependent on you, though. You should be able to assign a good value judging by the sales revenue and the rate at which sales are coming in.
  • Goal setting – Another way to make a budget plan would be like reverse engineering: Knowing the end result and working back from there to recreate the result. Suppose you set a goal of a specific number, say, for a number of converted client for every potential new client, and you are converting 5 new clients from 20 potentials. Hence if you aim for 20 conversions then you should get 80 potentials to meet your goal. With that you can look back at how much it cost you for the 5 conversions and you can calculate how much it would be for the 20 conversions (four times the cost).

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Calculating Your Target Sales

In connection to the previous section on setting measurable marketing goals, you can calculate your marketing budget as a figure from a percentage of your sales within a given time period. You will need to collect the following data:

Current sales – This works as a baseline for what could be your sales plan for the coming period. This method works if you already have records of prior sales. You also need to consider any upcoming obsolete products or expansion which may increase or decrease sales targets.

Projected sales – Projecting sales by basing on previous months is another way of calculating target sales. You have an option of extending the forecast to n number of months and so forth depending on the duration of your forecast target is. The math for projected sales calculation should be pretty simple:

  • Multiply the number of units sold with the individual price
  • Divide per category of sales
  • Get the average for each category
  • Get the sum total for all categories, to represent overall sales forecast for the month

Moving average – This is a figure you arrive at when you get the average of your projected sales and your current sales. This method is used to make a conservative estimate on a sales forecast.

Ideal sales – This way is done by setting a sales volume to be reached in a set duration of time. Easiest and probably the simplest calculation of the four.

Depending on how you want to drive your sales target and on the type of business you have, each figure can be calculated separately for a product or service in your total annual sales.

Steps in Organizing Your Marketing Budget

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Setting a specific budget can be something of a pain in the butt when trying to organize how that budget is to be allocated. Here are a few steps to take to make organize your current finances, where to spend marketing on and strategic adjustments on that budget.

Step 1. Determining your current financial standing

Organizing information regarding your revenue (such as in your financial statement) is the first step and knowing how much your company makes for a certain time period is vital in making your budget. You should at least have an estimated minimum revenue that your company makes per time duration. Having that figure, you can now deduct all your expenses incurred in the same time duration which includes your cost of materials and labor. The remaining amount should now be considered as your disposable income. Having determined this, you can then comfortably work within that budget to allocate to different parts of the business.

Step 2. Fund allocation

After determining a set amount for marketing, your next step should be in directing which marketing plans to spend the budget on. These would have to be divided accordingly by you per segment such as print ads, banner ads, social media, and email advertising. Depending on your budget allocation, you have the option to provide opportunities for TV or radio advertisements.

Step 3. Analyze available data to make necessary changes

You should always work within your budget allocation and not beyond the limits. In rare cases or exceptions, considering different kinds of approach to your marketing is also recommended as trends in marketing can change or occur quite fast. Changes in revenue are also indications if a strategy is working for you or not.

Step 4. Determination to follow through

Plans are all well and good but to keep your business from stagnation and eventual decay, it is important to stay committed to your goal and be persistent in following through to its completion. Business will not grow unless marketing efforts are increased, products are improved and developed, and revenues continue to go high.

Changes in Marketing Budget Trends

The larger the company or business is, the more it needs to spend on marketing from its revenue. There is always a clear and visible cost to your organization scale in relation to marketing efforts. The larger the company is, the more efforts have to be made to dedicating resources to some previously simple processes which have suddenly resemble complex process flow charts after scaling. Usually this happens to different divisions or units inside a large organization where each is responsible for their own marketing resulting on some redundant and unused technology and processes.

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With the advent of technology in business, it has become a more significant priority for large companies to invest in innovation or technology. Incorporating innovation to marketing strategies and your budget helps you stay at the forefront of the business without getting left behind at the end of any financial year.

Budget Allocation Tips for Digital Marketing

As a measure of effectiveness, there is such a term as “return on ad-spending” or ROAS in digital marketing and allocating budget for digital marketing has never been more complex than how it is today. Some businesses opt to invest more on initiatives and campaigns that give the highest return on ad spending but somehow lose out on other opportunities available for them.

Not to be on the negative side, but let’s get real—a year is a long time to rely only on one form of media or marketing. What works well this month may not work at all in the next and so forth.

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There are no definitive rules in digital marketing, as digital marketing has become a free-for-all arena where anything and everything under the sun could and may not work, such as social media marketing tools and email marketing tools.

Tip 1: Be flexible

Being able to adjust budget allocations on the fly is important in surviving today’s digital marketing maze as factors affecting marketing initiatives may have great impact at a time but suddenly change in the next. Fast reaction time is needed to counter any situation as far as marketing trends are concerned.

Tip 2: Don’t max out pay-per-click campaigns

Monitor your pay-per-click campaigns throughout the day. Getting to your maximum daily budget setting early or mid-morning is a sign that your ads may be working too well and not achieving the desired effect. Reducing cost for your pay-per-click bids may achieve the same effect or number of clicks when distributed throughout the day. Again, this is a delicate balancing act of allocating budget to your different campaigns.

Tip 3: Set campaign budget

It is also important to assess the general interest in relation to your campaign to assess if you are allocating more budget than is necessary to that campaign. There are usually keywords that require less money if market interest is considered and more specific keywords are used.

Tip 4: Display ads

Display ads are an effective way to have your product seen right away but may sometimes not present itself in a timely manner. Some users may not just be looking to purchase or make a reservation at that exact moment the ad is being shown. It pays to study your market in order to schedule an ad in a better timely manner.

Tip 5: Free trials and coupons

A lot of platforms and applications are offering free trials for first use. Make the most of them before actually spending money. These opportunities are also a great way of test-driving the platform’s effectiveness in relation to your business model.

Tip 6: Save for that extra spend

Emerging tools and apps that help marketing are constantly becoming available for businesses. It would not hurt to have money allotted in trying them out. Who knows, there might be an application that would be a good fit to your specific business and you only need to try to know. Make sure though to conduct thorough market research on your own before spending any hard-earned cash on something new.

Bonus Marketing Tip: There Is No Spoon

In the movie Matrix, Neo is advised by the Oracle upon failing miserably to telepathically bend a spoon, that as a matter of fact, there is no spoon. The same might be said for marketers in this digital age. There are no fixed and set rules in digital marketing. The only constant in this universe also applies—change is always there. It is, therefore, very important to be adaptable and flexible to change the same way the top marketing trends do. Your business model should not be static but otherwise be dynamic.

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Being a dynamic business means to be able to adjust to the flow of your market the way water flows through solid matter. A business cannot control the market it is in the way a ship cannot control the sea it navigates. We do not hold such omnipotent power to change the course of the waves happening in the business market.

What we do have is the direction and control to adjust and align the sails of our business in response to the trends that are affecting the business. We are not gods but it is in our power to decide where we want to go and how that journey will be made. We need only have a concrete plan on getting there and the vehicle, which is marketing, to get us to that destination.