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How to set your marketing budget

3 min read

Back to Blog

3 min read

How to set your marketing budget

Author: Phil Birss
Posted in Marketing on 13th November 2017 9:00 am

Before you can begin planning a marketing strategy you need to know the resources that you have to work with, most fundamentally defined by your budget. Typically companies spend around 8% to 10% of overall gross revenue on marketing. There is a great deal of flexibility with this number, however, with some citing much lower figures. What’s more, though, where businesses are focused on high growth, or are in highly competitive fields, the budget can be considerably higher, making up as much as 20% of gross revenue or more.

Nevertheless, with these very rough figures in mind you can begin to look at what strategies are likely to be possible for you in order to bring your product or service to market.

Areas of budget focus 

The two main areas you’ll need to budget for are paid advertising and marketing materials. As an underlying structure, you’ll need to develop art, designs and logos and to create a website to act as the online hub for your marketing and advertising activities. Beyond this you should budget for the cost of brochures, leaflets and promotional material as well as for print, broadcast and online advertising. What’s appropriate for your business will, of course, depend on your strategy and worldview – Google’s success wasn’t built on branded pens, for example.

Optimise and iterate

As soon as possible you should have metrics in place to gauge performance – including calculations of your return on investment from spend and the customer lifetime value (both real and estimated).

A fast track to devising a strategy is to clone your competitors: identify where they are seeing successes and replicate their approach. You can then begin to measure performance and adjust your approach accordingly. There are a few drawbacks to doing things this way, though – firstly, you can only guess the results that your competitors are seeing; and, secondly, going head to head with them in the same fields that they are already in will inevitably be a case of diminishing returns, dividing the market rather than expanding or diversifying it.

An example of this in action is the fact that competing for the same AdWords keywords (rather than identifying under-targeted alternatives) will ultimately only make them more expensive. Finding new markets, meanwhile (think televised shopping channels), will always be more profitable – selling people products that they never previously knew that they wanted.

Growth hacking

Of course, the scope of your marketing outreach shouldn’t be set entirely by financial constraints – where your reach can extend beyond spend (for example with viral marketing), you can punch significantly above your weight without incurring cost. The field of growth hacking sets to identify just such strategies, which can drive explosive growth at minimal expense. Most fundamentally this means outsourcing your sales legwork, whether via affiliate marketing (having external partners promote your offering, as Amazon does) or turning your customers into advocates (for example, giving them enhanced features for recommending your services to their contacts, as Dropbox does).

Justify investment

They key to increasing your budget is to prove your results. If you can point to how spend is driving sales and revenue, and how you are optimising your processes, then it’s easy to make the case for increased budgets. While marketing has traditionally been classified as a cost-centre rather than driving revenue, quantification can definitively identify its value. Furthermore, with this kind of modelling in place, spend can be based on projected revenue rather than trailing historic performance – hence driving investment in marketing and the growth of the business.

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