One of the most asked questions in a sales call is, "How much should I be spending on marketing?" It can be quite a dilemma for any size business. Do you want to know what the second most asked question is? "What experience do you have in my industry?" You would think they're unrelated, right? They're not. This question always validates the first one. Experience. So you see, it's not a simple question to answer. There is no one-size-fits-all when it comes to marketing budget advice. So — what's a business to do? Don't panic. There is a solution. Let's break it down and take a look at the things to consider when determining your marketing budget.
Why is a Marketing Budget Important?
The short answer is that if you leave marketing out of your business plan, your business will eventually fail. All your hard work will go right out the window. Even the best sales tactics will fail if your potential customers don't know your business exists (trust me on this one, I've been in sales for a long time). You can't find something that you don't know even exists. The bottom line is that to make people aware of the value you bring to them; you have to allocate some of your budget to marketing.
How Much of My Budget Should I Devote to Marketing?
When I ask prospective clients how much of their budget they have set aside for marketing, I get varying answers. The most common one is, "How much do I have to spend to see results?" Let's be honest, what they're really asking me is, "What's the least amount of money I have to spend to increase business?"
Once again, the answer isn't black or white.
There are a lot of things to take into consideration when determining your marketing spend. However, the general consensus among business advisors is to allocate a percentage of your revenue for marketing. In general, a good rule of thumb is for B2B companies to plan to spend about 2-5% of revenue on marketing initiatives. For B2C companies, that percentage is more in the 5-10% range.
First, I think it is important to break down the planning process into bite-sized chunks.
3 Factors You Need to Consider When Planning Your Marketing Budget
You can't just throw some money at it and hope it will work. It's important to have a method to your madness. When Atlanta Braves Head Coach Brian Snitker makes draft picks to build his team, he knows everything that factors into having a successful ball team. Yes, he has a budget he has to stick to, but the fact remains that he has a plan to build success. Keep these factors in mind when thinking about your marketing budget:
1. Define your goals
Goals are the building blocks of your inbound marketing strategy. You can't plan a budget if you don't have a marketing plan in place. The goals for your company should align with your vision and mission for employees to best guide their own actions and decisions. When creating your goals remember to make them SMART goals. Here is a SMART goal template to help guide you.
Start thinking about your objectives (a measurable, specific action an employee or team needs to take to meet the needs of a larger company goal) for marketing your business. Is your goal more web traffic? More overall leads? What kind of customers do you want to attract? Setting your goals will allow you to plan for what needs to be done.
Consider your customer segments, the buyer personas you want to reach, and what their pain points and needs are.
2. Factor in all your costs
Inbound marketing has many components that work together to form a marketing strategy.
Having a place to store and manage your customer and prospect data, track your interactions, and automate your marketing. Investing in a CRM (Customer Relationship Management) tool is vital. When it comes to building the best tech stack for your inbound marketing strategy, we are partial to HubSpot. There are other CRMs out there. Find one that is right for you.
You need to consider the cost of your website, design, and monthly hosting. Keep in mind that a website isn't a build it once and you're done kind of deal. For your website to be successful, it is best to follow the Growth Driven Design philosophy. Making continuous improvements over time based on data from your ideal customer's needs can help your website provide a better user experience, scale with your business, and ultimately close more leads and business.
Social media is where millions of people are every day. You'll miss out on millions of opportunities if you don't include social media in your marketing strategy. These are some of the benefits of being active on social media:
- Increase brand awareness
- Drive traffic to your website
- Generate new leads
- Boost brand engagement
- Build a community around your business
Set aside money for social media platforms that make sense for your business and where your ideal customers are spending their time online. For B2C it might make sense to have a heavier presence on platforms like Facebook, Instagram, and TikTok. For B2B, it could be an account-based marketing strategy on LinkedIn. Regardless, it's important to have some money set aside for this strategy.
One final note on social media — don't be afraid to spend some money on advertising. The larger social networks get, the more pay-to-play they become. Advertising on Facebook, Instagram, LinkedIn, and TikTok can be very powerful and open your business up to opportunities that would have never found you organically. Let's dive more into that now...
It can be expensive, but you can't make money if you don't spend money. There are many options for digital advertising, depending on where your consumers are. Platforms like Google Ads, LinkedIn, Facebook, YouTube, Instagram, TikTok, and even Pinterest offer paid advertising opportunities. There is no magic number when it comes to your digital advertising spend, but you ideally should stick to at least a $1,000/month minimum budget for ad spend to get the most value out of it. This is the same as your website; it's not one and done. It takes time to see big results. As you build a history of advertising campaigns, you will better be able to measure the effectiveness and more accurately set the budget and campaigns.
It is wise to have money set aside to develop and send out content daily, weekly, or monthly depending on your business. Email marketing isn't dead despite the rumors. It helps establish your business as a thought leader and fosters repeat business and referrals. Lead nurturing email campaign strategies work to help keep your business front of mind to your prospects who might not be ready just yet to buy your service or product.
It should be no surprise that video is very effective in helping to bring a marketing campaign to life. You need to budget for a video shoot and editing. A Lot of businesses are also using their smartphones and making high-quality videos to be used for digital campaigns.
With everything you are doing on the marketing side, you want to make sure that your sales staff is trained in the areas they will need to be familiar with. Trained staff can close more deals effectively.
3. Keep track of costs and adjust as needed
As you work through your marketing budget, it will be clear what you can afford and help you prioritize. You want to keep track of your web analytics and campaign results to adjust things as needed. If you see your digital advertising is acquiring more results than your social media, pull back a bit on social media and throw more of your budget at digital advertising.
When planning your quarterly and annual budget, make sure your projections are realistic to your actual market spend.
Try Our Free Marketing Calculator!
Planning your marketing budget can seem overwhelming — there are so many things to consider. Each business is unique, as are its customers. What works for one business might not work for yours. Do your research and be prepared to pivot when you start acquiring data from your marketing initiatives. You can estimate your cost of inbound marketing easily using this tool.