How to Calculate Your 2024 Marketing Budget

Is there a right amount, and what is too much? Getting the most out of your marketing budget is simple, if you know what to do.

• Your marketing plan should include a budget. Diverse marketing strategies will require resources. 
• To develop a marketing budget, identify your marketing goals and the best channels to reach your target audience.
• Depending on the size of the business, marketing expenses can range anywhere between several thousand dollars a year to thousands a month.
• Developing a marketing budget that delivers results without negatively affecting the bottom line is the goal for entrepreneurs and marketing teams at small to medium sized businesses.

Every business marketing plan needs to include a marketing budget – a specific amount that will be devoted to marketing the business’s products and services. It can be difficult to determine a marketing budget, especially if you are new to marketing investments. The amount that a business spends on marketing can vary greatly depending on its industry, location, and goals. 

Marketing budgets specify the amount to be allocated for staff salaries, equipment, marketing communications, ad design, and specific marketing channels. You can align marketing strategies with business goals and funnel money into marketing campaigns with a high return on investment (ROI). 

Here we’ll look at how to create a marketing budget, how to track it, and how to measure its effectiveness.

Step 1 – Creating a Marketing Budget

Marketing budgets are typically developed quarterly or annually by businesses. All the short-term and long-term projects your team plans to develop should be included in them. 

Your marketing budget should be set according to these four steps. 

1. Establish your marketing objectives.

To increase gross revenue, marketing aims to build a sales funnel or generate direct sales. As part of your marketing strategy’s big picture, you must determine short-term and long-term marketing goals, as well as key performance indicators (KPIs). 

A short-term goal might look like this: 

• Increase brand awareness by generating 100 new followers per month on social media channels.

A long-term goal might look like this: 

• Rank first on Google for three of your main keywords.

 

2. Identify your target audience (buyer personas).

Buyer personas are fictional representations of your target customers. It’s okay to have more than one buyer persona, but no more than five for most small to mid-sized businesses. 

Get specific when creating buyer personas, and let data guide you. Developing buyer personas can be accomplished in several ways:

• Take a customer survey.
• Identify people who may be in your target audience and interview them.
• Analyze the demographics of your audience using Google Analytics.
• Track user interactions with your brand using Facebook Insights.

Include the following information in every buyer persona: location, age, marital status, job title, income, education, motivations, sources of information, and how the product or service will make their lives easier.

 

3. Be aware of your competition and the market.

Researching your target market, especially buyer demographics, can help you better understand it. 

Assess the following information to gain a better understanding of your market. 

• Demographic information. Where do your customers live? How educated are they and what is their average income?
• Factors outside the control of the organization. Are there any external factors that could impact sales? As an example, economic trends can influence how you plan your budget, and tech trends can influence how you shop and pay. 
• What customers want and need. Identifying your market’s wants and needs is another way to understand them. Can your company fulfill the top needs in the market? Consider customers’ needs from a broader perspective. 

Researching the competition is also part of market budgeting. Here are some questions to consider:

• What are their top-used marketing channels? Use marketing intelligence to gain insight into the most used channels of your competitors.
• Are they currently using any ads or marketing strategies? 
• What does their marketing budget appear to be? You can again use marketing intelligence or gain insight from platforms like Google Ads even.

Marketing spend can be impacted by the type of industry. According to the February 2022 CMO Survey, B2B product companies spend an average of 9.4% of their revenue on marketing; B2B service companies spend 10%. The average B2C product company spends 14.2% of its revenue on marketing; the average B2C service company spends 8.7%.

 

4. Decide which marketing channels to use.

Make sure you market where your buyer personas are. Marketing channels can be categorized into four main categories:

• Digital marketing. Social media marketing, online content marketing, automated or manual email marketing, pay-per-click advertising or social media advertising (paid media), and SEO are among the digital marketing channels.
• Inbound marketing. As the name suggests, these marketing techniques “pull” and bring interested, searching consumers to you. Some inbound marketing channels overlap with digital marketing, such as SEO, business blogs, YouTube and Vimeo videos, and e-books.
• Outbound marketing. Sometimes referred to as “Prospecting” campaigns, these are campaigns that are soliciting interest in potential consumers. Tracking outbound marketing can be challenging, so combining it with inbound marketing is helpful. Email marketing is the most traceable form of outbound marketing. Television and radio advertisements, direct mail marketing, press releases, trade shows, and promotional products are also examples of outbound marketing.
• Brand awareness campaigns. Social media marketing and advertising, content marketing, public relations, and video marketing and advertising can also overlap with these channels. Brand Awareness helps ensure reputation, general awareness, and trust plus prominence when it comes time for a prospective buyer to find a solution to their problem via a product or service.

 

What is the appropriate amount to budget for marketing?

Marketing budgets are developed using a variety of strategies, including:

• Revenue-based. Setting aside a percentage from your annual revenue sheets can help you determine your marketing budget. It is common for businesses to allocate between 6.5% and 8.5% of their budgets to marketing. Newer businesses and high margin businesses like SaaS, may have a higher percentage. Spending 10% to 12% on marketing is a good idea for businesses under five years old.
• Matching the competition. You can also adjust your budget according to the amount your competitors are spending, based on previous research. Believe it or not, we often find in recessions, maintaining advertising budget while competitors are scared and reducing can actually help you take over market share.
• A top-down approach. Top-down budgets don’t have a set amount to spend each quarter or year. A figure is determined by management and the marketing department is asked to stay within it.
• A goal-oriented approach. Management and marketing set goals first, then set a budget to achieve them through goal-driven marketing. Social media followers may be one of your goals, for example. You may also want to maximize your online conversions by achieving X number of conversions. Each goal should be assigned a monetary value. The value of 100 new followers on social media, for example, could be assigned at 50 cents per follower.

 

Step 2 – Budgeting Mistakes to Avoid

With so many moving parts involved in setting up your marketing budget, mistakes are more likely to happen. It is possible for your business to face financial challenges if you make any mistakes in the process. 

The following are a few common budgeting mistakes. As you prepare your budget, keep them in mind. 

• Spending less on effective methods. Even when a newer marketing channel proves successful, companies often fund their long-standing favorite processes. It is logical but misguided to believe that a successful marketing method will always be effective. A consumer market shifts frequently; what works today may not work tomorrow. Invest consistently in both new and old successful strategies. Through improved automation, personalization, and other upgrades, you can keep up with changing market conditions.
• Leaving bad data uncorrected. Marketing methods that do not work with your target audience can be financially risky. Creating effective marketing campaigns requires assessing your consumer base’s data, but bad data may result in less effective campaigns. Make sure you remove any inconsistencies or outliers before your budget is impacted.
• Current customers are being discounted. To move as many consumers through the sales funnel as possible, you might feel pressure to cast a wider net when creating a marketing campaign. However, adding new customers costs MORE than keeping your current ones. Only a certain number of people will reach the end of your sales funnel, and they often have multiple reasons for doing so. Retain these people to boost profits more consistently.
• Using the marketing budget from last year. As consumer priorities shift from year to year, a marketing budget that worked one year may not be effective the next. A reexamination of company goals and a new analysis of the current market should always be part of the budget-making process. It can even be possible to create new marketing opportunities by analyzing how technology, politics, social movements, and other factors have affected consumers. 

 

Step 3 – Maximize Your Marketing Budget

A successful business relies heavily on marketing. Your marketing strategy is what attracts new customers and keeps current ones coming back for more. In most cases, you can only devote a certain amount of resources to marketing. By creating a budget, you can direct your spending toward the most effective channels – while keeping enough money for everything else.

The team and expertise at Renaissance Marketing can help you implement these best practices. 

Contact us today to schedule a convenient time to review your marketing budget, goals, and objectives. Let us help you design a budget that makes the most sense for your business.