Many businesses make basic mistakes when budgeting for marketing that lead to wasted money and missed opportunities. Here how to get better marketing results by measuring and prioritizing your activities.
Define your business strategy and marketing plan
A marketing budget is simply an instrument to help you achieve your business goals. If your goals aren’t clear, you need to step back and work with your team to develop an up-to-date business strategy. It should include objectives for the coming months and years, and an action plan for achieving them.
You also need to create a marketing plan as part of your business strategy. It should spell out how marketing will help you achieve your business goals. This is where you define your brand, product positioning, target customers and their purchase journey, your competitive edge and competitors’ offerings.
Determine your current marketing spend
Next, determine what you currently spend on marketing. This should include a detailed breakdown of everything you spend to promote your business, including:
- digital and traditional ads
- marketing personnel (whether in-house or external)
- digital assets (your website, social media, content production)
- marketing management tools (i.e., analytics services or marketing automation apps)
- events and marketing collaterals (i.e., trade shows, booths, promotional items, brochures, business cards, signs, samples)
- sponsorships and other branding efforts
It’s important to include plenty of detail. For example, you should break down ad spending into subcategories, such as Google AdWords, Facebook ads, newspaper ads, billboards and event sponsorship placements.
Measure the effectiveness of your spending
Track to gauge the effectiveness of your spending—for example, conversion rates, website traffic data or lead generation.
The metrics you pick should be tied to your key performance indicators. For example, if your goal is to promote your brand, you can monitor traffic to your website, bounce rates and conversion of website visitors into paying customers. If you’re going to trade shows, you can track the number of orders or email leads you got at the show and compare those to the cost of the show.
Optimize your efforts
With this information in hand, you’ll be able to create a marketing budget for the coming year. Look at your current spending for each line item and ask whether you need to change the amount to match your growth plans. A key consideration is each activity’s ROI.
For example, if your goal is to increase sales by 20%, you may need to upgrade your website, buy more ads or hire more marketing staff. Consider both quick wins and longer-term tactics for achieving your business goals.
Get input from your sales team on how to better target marketing spending. You can also benchmark your spending against industry averages to see how you compare with similar businesses. Also speak regularly with customers to ask them how you’re doing in your product offerings, pricing and value you bring them.
70% should go to activities with proven results for your business, 20% to efforts that could be effective but aren’t as certain, and 10% to new and untested activities.
Follow up and give guidance
Once your budget is set, regularly monitor your metrics and actual spending—once a month or at least quarterly—and make any needed adjustments based on the effectiveness of various activities.