Building a marketing budget can prove deceptively tough. It's not as simple as simply assigning a dollar amount to your marketing efforts based on your current profits or keeping the budget you've always held. Unfortunately, many marketing plans sell themselves short at this early stage. Many times, the marketing budget is divided among pre-existing categories like "paid search ads" and "radio spots" without considering the goals behind those marketing efforts and how to best accomplish them.
With the below steps, you can plan a more effective marketing budget that will allow you to reach your advertising goals and allocate funds in a way that will help make it happen.
1. Set OKRs
OKRs, or Objectives and Key Results, allow you to define the goals of your marketing campaign clearly. Using this method, you start by assigning an objective: the one big-picture goal that you want to accomplish with your efforts. Then, you set up to five key results: measurable, quantifiable metrics you can use to evaluate the success of your marketing campaign.
By setting OKRs, you can measure your goals tangibly. Your goal might be simply increasing sales. It might be more complicated: driving more engagements to your social media page, raising brand awareness, or improving customers' opinion of your business. By clearly assigning these goals, you can better understand what solutions are required to succeed.
2. Don't just iterate on last year's budget.
Many businesses simply roll over last year's budget when creating the new one. They might increase the funds allocated to specific areas based on percentages, without taking other factors into consideration. Reusing the budget, however, may not allow for growth. It doesn’t take into consideration new conditions: the latest changes in the market, the changing vision of your company, or the changing needs of your customers.
Instead, start fresh based on the team's current OKRs. Take the time to carefully think through the benefits of each type of marketing and how each can impact your goals. Then, work with other departments so that they understand why the budget differs from one year to the next.
3. Outline the sales funnel.
Take a clear look at your sales funnel and how it impacts your customers. How do they move through that funnel? What do you need to change in order to move them through more effectively?
At the top of the funnel, you’ll want to know how many visitors your site received or social media likes or engagements you get per month. How many people are interacting with your information?
In the middle of the funnel, consider how many leads you generate: the number of people who give you qualifying information and start to interact more closely with your brand.
Finally, evaluate the bottom of the funnel: how many leads are converting into deals, how much the average customer spends on their first purchase, and how much they spend over the course of a year.
You also want to consider a customer's lifetime value: the average first-time purchase might be $100, but 50% return and spend another $500 over the year. That means the lifetime value of each customer is more than the $100 they spent on their first purchase.
As customers move through the sales funnel, they will need various touchpoints with your brand. Each touchpoint, or point of contact, helps establish your brand with potential customers and increases the odds that they will make a purchase with you. Touchpoints can be split among different mediums: content marketing, radio and digital advertising, SEO, and social media marketing.
In considering your marketing budget, you need to figure out the current effectiveness of your funnel. How much does it cost to create a new lead, customer, or client? What touchpoints do you already have in place? Where do you need more in order to reach your goals?
4. Do a cost analysis.
It’s important to know how much it will cost to implement your touchpoints. This must include operational costs as well as the direct costs of your media. You must also carefully consider how much money you must spend in order to reach your OKRs. Without an adequate budget, your marketing plan may fall flat.
5. Make your initial allocation.
Using information gathered from the cost analysis, sales funnel and data from past successful campaigns, allocate your budget among your marketing mediums. Carefully consider how much you need to spend, and in what areas, to reach your goals.
6. Revisit and revise.
Regularly check your marketing ROI: the amount of revenue you're making for your investment. Use this information to determine where to increase or decrease spending: if you find out that a medium has better returns than expected, for example, you may want to increase spending in that area. However, be careful about diminishing returns: increased spending does not always lead to a corresponding increase in your ROI. By monitoring your marketing carefully, you can use marketing ROI to reach and even surpass your goals.
By starting with OKRs, your budget will more closely reflect the plan you want to accomplish rather than just guessing at what channels will be most useful. After allocation, optimizing to the mediums that show the highest ROI will ultimately prove most successful for your business. With these strategies, you can improve your marketing ROI and increase your ability to meet overall goals.