Creating a realistic marketing budget for small and local businesses is about balancing what you need to spend to move the needle and not just spraying money at everything. Getting a handle on your costs will free up resources to earmark to increase your spend during peak seasons.
However, if you're pouring over the numbers and need help figuring out where to start packaging spending ideas into an organized plan, use these helpful tips to structure and streamline the process.
If your current marketing spending seems too convoluted to track, let alone repeat, focus on setting marketing objectives and a marketing strategy. Different campaigns and spending should be oriented toward annual, quarterly, and monthly goals. Once you identify the objectives, you can set timelines and deadlines and add milestones for longer-term goals.
Some different objectives you might focus on include:
Over time, you'll see what percentage of spending is—and should—be allocated toward each goal.
A straightforward tactic for creating your budget is looking at how you spent money on marketing in the past. Having accurate and reliable data is essential. In cases where your historical performance data is inadequate, or this is your first year of business, it’s important to develop flexible estimates that allow for comfortable adjustments so your strategy remains on track regardless of potential increases or decreases.
Some of the most important elements of past performance to consider include:
Align your marketing budget with your target audience and prioritize spending on channels where customers spend their time. Potential business banking clients are not likely on TikTok! Prioritize media based on your target audience's interests: some markets prefer short videos, while others want detailed text.
You can identify your most profitable audiences and plan accordingly if you have historical data. If not, industry blogs and reports can help fill the gaps if you need data for your specific business. Alternatively, allocate part of your budget to marketing research before revisiting your overall budget.
Industry research is a powerful tool, especially if you don't have your own marketing data. Marketing-related researchers publish trends regarding spending and budget allocations for collections of businesses based on their size, industry, revenue, and other factors like geographic location. This helps you compare your strategy, spending, and approaches to general trends in your industry. Simply identify which categories your business belongs in and compare your efforts and results against industry standards.
Marketing budget line items might focus on different metrics, from website views to feedback to cart size. However, one of the most important numbers is the customer acquisition cost, or the average amount you spend to engage with a prospect and convert them into a paying customer.
Once you know this number, you’ll know where and how much to spend and what changes might drive down the customer acquisition cost to drive up ROI.
Completely lost in a sea of budget templates and advice? When it gets overwhelming, you can use this simple rule of thumb to create a floating marketing budget: base your spending on your revenue. Set aside 5-15% of your revenue for marketing spending.
Each industry is slightly different, so you may have to vary the percentage you set aside to find the best approach. While this does have some limitations, like the off-peak performance before a big spike limiting how much marketing you can do, it's a good rule to avoid overspending.
If you've completed the tips in this article, then you'll know which marketing channels are the most important to your business. Gauge each channel both on cost-efficiency and reach.
If marketing dollars get tight, you can start to chip away at the channels with the least yield and feel confident you're holding onto your best performers. If you have a larger marketing budget, use your priority list to spend excess dollars where they have the most significant impact.
Every industry and niche has its own off-peak and on-peak cycle. That is why planning your marketing budget is so important: no one wants to stare grimly at the holiday retail season with just two-twelfths of the budget left in the bank. Instead, give a disproportionate amount of your budget to your highest-performing months.
Don’t set your budget in stone. Instead, continually monitor performance and make gradual adjustments along the way. You will want to temper this with a long-term view. It is rare for a marketing campaign to pay out immediate results, but a long poor- or negative-ROI streak should be identified and resolved.
If you can, set aside a sliver of your marketing budget as 'maybe' money. If you see a big surge in your video content campaign, you’ll want to feed it with a bigger budget.
Alternatively, a brand-new marketing opportunity, such as a local influencer, might come along. If you have a bit of a margin for experimentation, you can easily invest in opportunities instead of having to skip them.
When you want to avoid a revenue percentage rule of thumb but creating a detailed budget is too much of a challenge, the Mid-West Family team will get our sharpest pencils to help.
We specialize in helping small and local businesses with all aspects of marketing, including figuring out a realistic budget. Contact us today to get started.