Your marketing budget can vary greatly depending on numerous factors, including your industry, the size of your company, the goals you set, your marketing strategy, and your target audience. In short, there is not a one-size-fits-all budget that is realistic for every business, but you can take certain steps to set a budget that is realistic for your business.
The following are some of the specific ways you can set a realistic marketing budget that is right for your company:
Set Clear Marketing Objectives
The very first step is to establish clear goals and objectives for your business. Figure out what you want to achieve with your marketing strategy. There are many goals you may set here, from brand awareness and lead generation to customer acquisition and sales. Realistic, attainable objectives will guide your budgeting decisions.
Also, as you set your goals, consider the frequency or time of your campaigns. You will want to ensure your campaigns have enough time to gain traction, but waiting too long to see results could hinder your business's ability to grow.
Analyze Past Performance
Based on past performance, identify the strategies and channels that worked best for your brand and generated a positive return on investment (ROI). Analyzing previous campaigns will give you in-depth insights into the most effective tactics that are worth the investment.
If you don't have any previous efforts to examine, or if you are questioning the ROI of past campaigns, make sure the goals you set for your new campaign are realistic and continually monitor your campaigns as they progress. You can then determine what is working and what is not and use those insights to inform future campaigns. Over time, as you continue developing your campaigns, you can identify patterns and recurring issues that you can work on fixing.
Know Your Target Audience
You should have a good understanding of your target market and what your audience wants. You can learn more about your target audience by conducting market research, which will allow you to identify the specific channels and platforms your audience uses. You will also find out how your audience engages with marketing messages. You may then use this information to allocate funds and other resources to the most relevant marketing channels.
There are plenty of ways to gain more insights into your audiences. For instance, you can conduct surveys of existing customers to learn more about them. You may also look at what kinds of audiences your competitors attract.
Research Industry Benchmarks
Look for key industry benchmarks and determine the average marketing spend in your industry. You can do so by performing market research and looking at industry blogs. The benchmarks you discover may give you a clear starting point to help determine a realistic budget range for your business.
For instance, you might discover that your competitors are typically spending more on content marketing compared to other areas, which could give you some direction when it comes to content creation and curation. You might want to invest in an effective content campaign that goes above and beyond your competitors.
Consider the Customer Acquisition Cost (CAC)
Acquiring new customers is often expensive, making it crucial to know the average customer acquisition cost (CAC). This number will account for all marketing expenses related to attracting and converting leads into paying customers. Based on the CAC, you can better allocate the right budget to acquire new customers and see positive ROI from your efforts.
Calculate your customer acquisition cost using the following formula: CAC = total marketing spend / number of new customers. This will give you a good idea of how much you're spending on bringing in new customers.
You can also figure out how to retain your customers more effectively with your marketing, which would help you spend less on customer acquisition as you build a base of loyal customers.
Set Percentage Revenue
One common approach to calculating marketing budgets is to allocate a percentage of expected gross revenue to marketing efforts. This percentage can vary based on various factors such as industry and growth stage, but anywhere between 5% to 15% is reasonable in most cases.
You may also want to reallocate your percentage revenue as you discover more profitable marketing channels and campaigns. Eventually, you will be able to more accurately pinpoint which marketing efforts give you the best results and ROI.
Prioritize Marketing Channels
Consider the many marketing channels that are right for you and choose the most effective ones. The many options include digital advertising, content marketing, social media, email marketing, and event marketing, among others. Be sure to allocate more resources to the channels that have previously given you better results. These channels should also be the ones your audience uses.
For instance, you may find that a large segment of your audience spends a lot of time on a particular social media channel. In this case, you would want to invest more time and money in this channel, posting, advertising, and otherwise engaging regularly with audiences on this platform.
Consider Seasonality and Trends
You will also want to consider any seasonal or market trends that may affect your marketing efforts. For example, if you own a home improvement business, you may not see as many customers in the winter months as they wait for the weather to warm up before completing a project. Other businesses may see a sudden unexpected demand for specific products or services that they will want to promote more heavily due to popular trends.
Based on your industry's seasonality and trends, you can adjust your budget accordingly to capitalize on peak seasons and prepare for market shifts.
Monitor and Measure Results
It’s important to monitor and measure your campaigns to gauge their effectiveness. To do so, you must have robust tracking and analytics systems in place that can help you measure performance and ROI. Using these tools, you can regularly review your results and make any necessary adjustments to optimize budget allocation.
While it's essential to analyze all results, do not jump too quickly or make constant changes to avoid disrupting the frequency and consistency of your marketing.
Flexibility for Experimentation
Save a portion of your marketing budget to use toward testing new strategies, tactics, or channels. You must be adaptive and innovative in this ever-changing marketing landscape. Allocating funds for a level of experimentation can lead to significant insights and breakthroughs. At the same time, you will want to ensure experimentation does not come at the expense of the overall campaign.
One strategy to use when experimenting with any marketing tactic or strategy is A/B split testing. This method uses two versions of an ad or content piece to see which performs better. You might change out an image or the messaging you use with each before running both versions. Based on the materials that perform better, you can continually optimize your campaigns to better connect with your audiences.
Effectively Plan Your Marketing Budget with the Help of a Partner
Planning, adjusting, and testing are critical for marketing efforts. Equally important is setting a devoted budget for your efforts in a strategic marketing campaign. This budget should be steady to maintain consistency and frequency, allowing for strategic gains over time.
If you need some help planning your budget, strategy, and ROI, the experts at Mid-West Family Eau Claire are here for you. Our professionals will analyze your business and industry trends to develop a plan and budget that work for you. Contact us today to learn more about what we can do for your business.
