When planning for the year ahead, think of your marketing budget as an investment rather than an expense. If your marketing plan is strategic, it drives success in your key initiatives. Your marketing efforts should be making an impact on your bottom line one way or another.
No matter how inherently great a product or service is, marketing is a necessary component of any business strategy. Take Colorado Tourism for example. In 1993, Colorado Tourism decided to cut its marketing budget completely, deciding the state’s popularity and innate beauty was enough to market itself. As a result, the state’s market share plunged 30%, representing a loss of over $2 billion in revenue. No matter a brand’s success, maintaining conversation with the public through marketing is a necessary expense.
While we can’t overlook the role marketing plays in a business’ success, we must acknowledge that marketing budgets are often still not at pre-pandemic levels. With that, business owners and marketers need to make each marketing dollar count. According to Gartner’s report, The State of Marketing Budget and Strategy in 2023, there are a few key challenges facing marketers this year:
In response, marketers and business owners will likely focus on their return on investment (ROI) when crafting their budgets. They’re likely to adjust teams, agencies, technology, and media spend. Tech optimizations may be necessary, so continuous optimizations are likely to be cut, with marketing focused more on making the most of existing tools. All in all, they’ll try to do more with less.
When planning your marketing budget, the key to doing more with less is focusing your key performance indicators (KPIs). Identify the key business outcomes you want to achieve this year and the marketing goals that will help you get there. Marketing goals can be awareness, sales, or loyalty, for example. The KPIs will measure that achievement. Common examples of KPIs are customer acquisition cost, ROI, or website visitors. Keep in mind that some goals like sales are more easily measurable than goals like awareness, but that doesn’t mean one goal is necessarily more profitable than another.
The key is to focus in on your marketing goals. While it would be ideal to increase awareness, lead generation, conversion, and loyalty all through marketing, spreading your marketing dollars to hit multiple goals could result in more general messaging, less optimized spend, and therefore, decreased effectiveness. To create the most efficient marketing budget, businesses will need to prioritize specific marketing goals for the year based on business and market conditions.
Once you’ve identified your desired business outcomes, marketing goals, and the KPIs to measure against, it’s time to start budgeting with the steps outlined here:
Start by taking a first pass at defining your base budget based on the funds you have available, historical spend, and your marketing goals.
Next, create a draft budget. Calculate all the resources needed to achieve your marketing goals, accounting for historical budget variances, inflation, and any changes in agency or other partners. The tactics you choose should align directly with your marketing goals. They could include social media, email, digital ads, SEO, mail, print, and events. An integrated marketing strategy is key. Consider your target audience and where you will reach them to drive the action you want.
Compare the budget of all resources needed to your base budget. From there, allocate funds or make efficiencies accordingly, prioritizing tactics that align with your marketing goals. These are directly tied to your business outcomes.
Once your budget is finalized, organize it into an easily understandable format and communicate it to any stakeholders that will be affected by your decisions.
Throughout the year, set regular intervals to analyze marketing spend. Compare your actual spend to the budget you laid out and make any necessary adjustments to reallocate funds to the tactics that are showing success and driving towards your marketing goals. If there are business or market changes that occur at any time, consider how this could impact your marketing and adjust accordingly. Be sure to document any lessons learned throughout the year so you can be even more strategic when planning next year’s budget.
While it may be helpful to set benchmarks based on average marketing spend in your industry, your marketing budget will be unique based on your products, services, target audience, and marketing goals. Start with a modest budget, keep things focused, and leave some wiggle room to experiment or change things up as the year plays out. These tips will not only help you achieve your marketing goals, but drive your business forward.