At SharedTEAMS, we focus on proven results, not unproven ideas. So our #1 tip when it comes to building a better marketing budget is to start marketing programs at a small scale and increase the investment as the programs start to produce results.
The key here is to focus on results. When starting a new program or project, ease into it. Yes, many projects require an initial investment, but it’s important to do your research before the purchase and then start small before scaling.
With the basics out of the way, create your budget with these steps:
Step 1: Know the baseline.
According to the Gartner CMO Spend Survey 2018-19, marketing budgets represent about 11% of a company’s revenue. Some marketing companies suggest between 5 and 15%, depending on your industry, customers, competition, and more. WordStream suggests that companies that have been open for five years or less should allocate 12%-20% of their gross revenue to marketing efforts while established companies that have been around for more than five years should allocate 6-12% of their gross revenue to marketing efforts.
When we calculate the average, 12% of a company’s gross revenue should be allocated to marketing. This, however, should be coordinated according to your marketing strategy and goals, and product and service rollouts for the year.
When it comes to advertising specifically, budgets vary across industries. Gartner found that retail companies spend the most on advertising (21.9% of their marketing budget), followed by automotive (12.6%) and financial services (12.2%).
Gartner also found that “companies that make more than 10 percent of sales online allocate 13 percent of their total budget to marketing, compared with companies without internet sales, which allocate 10.6 percent of their budgets to marketing.”
Actionable insight: Review the most recent budget report for your company to see if it has the percentages already calculated for you. If not, do the math. If you don’t have access to the company’s final budget report (for the year, quarter, or month), then seek it out. This information is invaluable and can help you understand where you are on the budget spectrum.
Once you know what percentage your company allots to marketing efforts, use this knowledge to help present your case the next time you present budgetary requests and suggestions.
Step 2: Look at your last budget’s ROI.
A base percentage is not the complete picture or a good enough reason to request a bigger budget. First, you must review the last budget and evaluate what worked based on your ROI.
In our last email, we showed you how to calculate the fiscal year and campaign-based ROI. Start with these numbers.
Look at your notes from when you calculated your ROI. What campaigns worked and what didn’t? Write both down. Can you tell what content formats and channels did and didn’t work? For now, you’ll want to focus on what worked, but don’t throw out what didn’t just yet.
Step 3: Consider your goals.
Consider your goals as an organization and as a department. Then ask yourself these questions:
- Do any of your goals need to change or be reworked based on the ROI of your recent budget?
- Does your budget need to change to further improve ROI and meet your goals?
- Do your campaigns need to be altered to improve ROI and meet your goals?
In general, spend more on what works and less on what doesn’t. However, don’t just repeat the same projects and campaigns because the digital marketing landscape is always changing. This is why it’s important to consider your goals in this process.
If your goals focus on brand awareness and engagement, then a lower ROI is acceptable. If your goal is to increase revenue, then a higher ROI is needed. Identify places in your budget that may need to be cut or changed to better serve your goals.
Step 4: Combine steps 1-3 and create a budget.
Aligning your goals with your recent ROI is key to budget success and approval. If one of your company or department goals is to try a new tactic, then some of your budget will need to be utilized for that.
When you combine ROI with company and department goals (and the average marketing budget to help persuade or convince your boss if your budget has been too low or on par), your boss is more likely to approve your budget.
Actionable insight: When crafting your budget requests, focus on multichannel campaigns rather than channels. From there, utilize your time and money budgets for the channels that have the biggest ROI. Not only does this offer you and your team flexibility, but it also helps prevent others from nitpicking your choices (say, for a Facebook ad versus a Google display ad because Facebook ads were performing better for that particular campaign).
In just 4 steps, you created a budget. It might need to be reworked a bit before you present it to your boss, but you now have a solid budget to back your marketing plans.