Marketing is a crucial part of all businesses around the world these days. In other words, you can’t run a company without having a marketing strategy. As you might know, your company’s marketing strategy and plan must have a marketing budget. If you are the owner of small business and this is the first time you want to determine your marketing budget, things may seem difficult and that’s normal. In this article of Niorise, we will talk about some tips that will help you realize how you can get started with your small company’s marketing budget. Also we will share some tips how you can track your company’s marketing budget and at the end, we will share some marketing budget templates with you. Stay tuned!
Before we begin, bear in mind that the actual amount you can invest on your marketing depends on your sector, region, and objectives and that doing your analysis before creating a budget is important.
How to build a marketing budget
Step 1: Defining your marketing targets
To set an appropriate marketing budget, you have to define your short-term and long-term marketing targets as part of a bigger picture: a marketing strategy (also known as a marketing plan). Predictably, you’re marketing in the first place to create either a distribution funnel or direct sales that raise gross income, and the trick to that is to be clear about your targets.
Bear in mind that marketing usually doesn’t produce overnight sales. You will need to adjust your targets when you execute your marketing campaigns.
Short-term target examples:
- Reduce website bounce rate by 5 percent.
- Gain 10 good social media comments every week.
- Raise brand recognition by attracting 100 new social media followers per month.
Long-term target examples:
- Get three of your key focus keywords on the first page of Google search results.
- Build a sales funnel that steadily generates 20% new clients in the next 3 years.
- Build a marketing automation flow for email marketing that saves the staff five hours per week.
Step 2: Knowing your target audience (customer personas)
A customer persona is a fictitious depiction of the target audience. You may have more than one consumer profile, but aim no more than five; not everybody can be your target audience, after all. Get accurate and then let data be your reference when creating your buyer’s personas.
To help you build your buyer personas, here are some ways to collect data:
- Survey your new clients.
- Interviewing individuals who you feel might be in your target audience.
- To determinate audience demographics, use Google Analytics.
- Track user engagement with your brand using Facebook Insights.
Also include this details for each of buyer personas:
- Marital status
- Job Titles
- Estimated income
- Education Level
- Motivations and Objectives
- Sources they visit to get information
- What makes life easier for them?
- What is it that keeps them awake at night?
- Bonus: a picture and a fake name
Step 3: Select your marketing channels
You must consider breaking down the marketing channels into four key groups. To make the maximum return on the money you invest, market where your buyer personas are going.
These channels involve social media marketing, content marketing, manual or automatic email marketing, online pay-per – click advertisements or social media advertisements (paid media) and search engine optimization (SEO).
Digital marketing overlaps with certain inbound marketing channels. There’s SEO, blogs, e-books, YouTube and Vimeo, and other forms of marketing content.
Outbound marketing is hard to track quite often, so it is helpful to combine it with inbound marketing. The most trackable method of outbound marketing is email marketing. TV and radio commercials, direct mail, news releases, industry events, and promo items are some types of outbound marketing.
Brand awareness campaigns
These channels might even overlap with the above channels and can include social media marketing and advertising, digital marketing, PR, and video marketing and advertising.
Now that you have a clear understanding of the platforms you can use as part of a marketing plan, you can ultimately determine the budget. There are costs involved with marketing on any of the aforementioned channels. Social media ads appears to be among the most cost-effective.
Main takeaway: Develop your marketing budget by defining your priorities, recognizing your target audiences and finding the right marketing channels to attract your audiences.
How much do small companies spend on advertisement and marketing?
A typical marketing spend suggestion for successful companies earning less than $5 million in profits annually is around 8 percent of the gross revenue, as per the U.S. Small Business Administration.
However, the actual sum of money small companies spend on marketing and advertising varies greatly. To give you a clearer sense of what to spend, the following companies shared their spending numbers and where those expenses went.
Dennis Vu, CEO and co-founder of Ringblaze
“We invest $3,000 a month on marketing. We are a startup in the SaaS industry, business phone app market. We offer a business phone app that lets our users quickly open up new channels for their consumers to contact them,” says David Vu, CEO and co-founder of Ringblaze.
“When it comes to the money we spend in marketing, much of it goes on search engine optimization and content marketing,” he said. “We know that it’s a hard game, but as of now, it’s made perfect sense in the amount of publicity and the amount of leads we created.”
In about two months, Vu’s company doubled its search traffic, tripled its website’s domain authority, created 10-20 backlinks to its site, and increased the amount of leads it gets by about 30 percent.
“We may have just been fortunate, but the results we received from digital marketing are outstanding,” Vu said. “Our initial reservations were that the agency we employed would not perform at all, particularly with a limited budget like this one. Most of the businesses I know spend at least five times that amount a month on ads, so we’re pretty pleased with the results we’ve received.”
Dave Madrid, solopreneur developer at p2p Business Awards
Dave Madrid, a self-employed entrepreneur, says, ‘I had intended to utilize bootstrap marketing, and my intention is still to do so wherever possible, as this suits with my business’s ethos. “This indicates that my external marketing investment is actually very limited, but increasing month-on – month. I have also done some external investment on location-targeted ads on Facebook, Google ads, off-page SEO operations and link-building.”
Madrid continued that he is growing his internal blogging activity, creating follow-up social media, communicating with local and start-up Facebook communities, running surveys, and posing engagement-generating questions.
“Up to now, I have noticed Facebook advertising to be an efficient means of producing impressions (more than Google ads), while interaction has been better done by Facebook groups, talking about our blog [and] interacting with questions from others.”
The budget for the external marketing operations in Madrid has risen from what he claims was an impractical $1,000 annually to $5,000 annually. He continues to determine whether his spending needs to increase as his company is fresh, and to gain ground in his market, he must raise brand recognition and online presence.
Madrid claimed that 15 percent or more is a fair level of gross sales to be invested into marketing and advertising for new companies. That can be drastically decreased among established businesses; even as little as 5 percent of gross sales could be just fine.
Kristin Marquet, creative director and owner of Marquet Media
Kristin Marquet says her business spends around $30,000 a year on promotional campaigns, equipment and contracting, which is about $7,500 per quarter.
Behind that marketing budget are two brands: Marquet Media – a branding and design consulting firm offering branding, website design and Public relations services – and Fem Founder, a media group that publishes entrepreneurial and marketing content for female entrepreneurs. Marquet also sells digital goods from New York City, in which she is based, on its website. Pinterest is one of the key marketing platforms she uses, generating email lists for her promotional goods and classes.
As other marketers must be, Marquet is explicit about her sales and profits. “With every dollar spent in promotional pins [on Pinterest], I earn about $1.30 in sales. I also invest in email marketing tools, which is around $600 a month. I use landing page tools to collect leads, which is around $30 a month, and social media automation, which is around $79 a month.”
Like several entrepreneurs, Marquet was unaware about marketing Return on investment when she began her company, so she was a little worried about budget allocation. She began with a $500 budget and evaluated Google and Facebook advertisements, but she learned that those places aren’t where her potential customers spend most time; instead, they’re very involved on Pinterest.
Based on her observations, Marquet assumes that any company can devote at least 10 percent of the overall revenue for advertising and marketing, but 12 percent is great when it has the resources to spend this much.
Main takeaway: The precise amount that a small company can spend on marketing depends on the conditions, but experts think 7% to 8% of total annual sales could be it.
How to monitor your marketing budget
Monitoring your marketing budget is the key to assessing your success. There are hundreds of budget tracking applications available, but many companies still use Microsoft Excel, which can do the job for you.
Build one line item per campaign that states the campaign name and spent amount. Don’t forget to include the wages of the associated staff and the overall time required to implement each project. Note where campaign and time changes are required.
Build one line item per lead with all the date, lead source, project, delegated sales person, notices, status and revenues generated.
When changing your marketing budget and modifying your strategy, go slow, tweaking one main variable at a time. Something as easy as updating a picture on a Facebook ad and increasing your spending by only a few bucks a day might make a big difference.
Main Takeaway: You can conveniently monitor your marketing budgets in Microsoft Excel, or you can utilize any of the hundreds of marketing budget monitoring tools available.
Marketing budget templates
A marketing budget template may be helpful for additional assistance. Below are some of the resources that provide marketing budget templates for free: