Setting Your Marketing Budget Using Data (and not Wishful Thinking) 

We’re back to discuss everybody’s favorite topic (wink, wink): Budgeting!

Look, we know the task of determining a marketing budgeting is about as dry as fall leaves. When it comes to marketing, everyone wants to do the fun stuff: Coming up with awesome taglines, ooh-ing and ah-ing over pretty brochures, mixing it up on social media in hopes it will be the next viral phenomenon. No one wants to sit down with a spreadsheet full of numbers.

But here’s the thing: The biggest bummer in marketing is not getting the results you want, and then second-guessing everything you’ve done to this point. Marketing is an investment, after all. Getting real about your budget (and doing so with real information) helps ensure you are setting yourself up for success.

That budget exercise should do three things:

  1. Benchmark yourself by looking at average spend for your industry,
  2. Get a sense of everything that needs to be included, and
  3. Allocate that spend to your different channels.

Benchmarking Your Spend—Is it Enough? Or Too Much?

So how much should you be spending on your marketing efforts to begin with? Of course, that answer is unique for every business and every market. But saying that doesn’t help you much, does it?

You might not be able to come up with an exact answer, but you can see if you are in the right ballpark just by checking yourself against a known benchmark. A marketing spend benchmark is simply an answer to the question: What does typical marketing spend look like for a company like yours, in your same industry?

It’s common for most businesses to allocate a percentage of their revenue (or overall operations budget, if that makes more sense) to marketing expenses. According to a Gartner survey of CMOs, businesses on average allocated 9.1% of revenue toward their marketing budgets in 2023.

Again, this varies wildly by industry. A 2020 survey by Deloitte, for example, asked CMOs what percentage of overall company budgets was used for marketing, and the results were interesting:

 Banking, Finance, Insurance, and Real Estate 8%
 Communications and Media 10%
 Consumer Packaged Goods 9%
 Consumer Services  6%
 Education 3%
 Energy 1%
 Healthcare and Pharma 18%
 Manufacturing 13%
 Mining and Construction 3%
 Service Consulting 21%
 Retail/Wholesale 14%
 Tech/Software/Biotech 21%
 Transportation 6% 

Note that this is overall spend; we’ll talk a little more about spending on specific tactics below. (That said, the Deloitte report does ask some questions in this vein; curious readers should check it out.) 

What to Include in Your Marketing Budget

Getting a realistic sense of how big your marketing budget should be is important, sure, but it raises the question: What does all that money go toward? (Or rather, what should it go toward?)

Putting together a solid marketing budget means thinking about all the ways your marketing tactics can achieve your marketing goals. Simply put: Anything that has to do with marketing should be included in the budget. One of the biggest mistakes we see businesses make is assuming that “marketing budget” just means “advertising budget.” And while, yes, you need to set aside money for advertising, there are many more things that are “must haves” when it comes to marketing, and which will fall under this budget. For example:

  • Paying your people: AI isn’t totally taking over (yet), so your marketing team’s salaries and benefits should be included under your marketing budget. Plan for 40% from your budget going to the people making things happen: content writers, people crafting your ads, a project manager, etc.
  • Advertising and promotion: Online advertising like Google Ads, print advertising (newspapers, magazines), and trade shows or other advertising tactics you use will typically take up roughly 40% of your spend. Don’t forget social media ads either; many of these platforms are free to use, but running ads on them isn’t!
  • Systems and software: Typically about 15% of the budget should be allocated here.
  • Room for error: Budget overruns happen, and special circumstances arise. Plan on having 5% of your budget earmarked for the unexpected.

When exploring these different categories, start with expenses that are going to be relatively fixed (such as salaries and software) versus ones that can scale up or down with need and budget (like digital ad spend). Why? Once you know what your “fixed” expenses are, you will have a better idea of what the variable spend is on things like advertising, link-building, and so on. These are easier to adjust as circumstances change.

Once you have everything (and everyone) under the marketing umbrella accounted for, you can start getting down to brass tacks. How do you differentially allocate funds to specific marketing campaigns, channels, and tactics?

How to Allocate Budget to Different Campaigns, Channels, and Tactics

If this is your first time putting together a marketing budget, there won’t be a lot of information to go on, so you will have to get a little creative. Even though your company might not have had an official marketing budget, there surely is some measure of what it costs to acquire a new customer, and how that was done. Maybe you attended some networking events, or paid to have your website designed. If nothing else, someone spent time on getting the word out.

For most readers, however, you probably have something of a marketing budget set aside already. When we meet with clients, the big question on their mind is not “How do I divvy up this pot of money?” Rather, it’s “We haven’t seen the results we expected—do we need to keep going and invest more in this tactic, or are we throwing good money after bad?”

In other words: Do you abandon the tactic, campaign, or channel in question…or do you double down?

We here at Pace have seen business owners angst over this very question again and again. Everyone knows that success means “keep doing what you’re doing.” But failure can mean a few different things—the timing was off, the messaging did not resonate, the channel was not the right channel to reach your audience…and yes, “You didn’t spend enough to achieve results” is also a possible reason why a particular campaign or tactic failed.

If you have the right analytics tools, and the right customer conversations, you can discover whether it’s time to fold or double down.

Letting Analytics Guide You

Your analytics tools will let you know how much money you’ll want to put into different channels within your marketing strategy. Making guesses about budget is a little like hiking near the edge of a cliff blindfolded—you might get somewhere, but it’s risky and it probably won’t turn out well for you. So, take your blindfold off and look at what your analytics are telling you!

For example: Google Analytics is a great tool for gauging web traffic and seeing where that traffic comes from (organic search, referral links, etc.). If a given source is not generating traffic despite heavy investment, it might be time to allocate those funds elsewhere.

Google Analytics can also map out the flow of users across your site. This is useful, because it shows which users actually make it to your conversion pages (contact us page, purchase page, shopping cart, etc.). If you find that most of your purchasers come through a given article or landing page, or come from a particular source (such as LinkedIn), that is all helpful information to know.

Analytics work just as well for offline tactics, too—assuming you are meticulous when it comes to updating your CRM. For example, if you have a sudden burst of high-quality leads because you attended a specific trade show, it’s probably worth attending that trade show next year.

Letting Customers Guide You

Analytics tools are great. We love them. But nothing beats an honest conversation with a real customer.

To do this, set aside some time to interview 8-12 of your best customers. Better yet, arrange with us to do it for you! There is something to be said for having a neutral, outside party conduct your interviews.

When we interview customers on behalf of a client—let’s call them “client X”—we like to ask questions such as these:

  • How did you find Client X?
  • When was the last time you bought something because you saw an ad? And where did you see that ad? Why did it speak to you?
  • Where do you turn first when you need to find products/services like those provided by Client X?
  • If Client X were to close shop tomorrow, how would you find your next vendor/retailer/brand?
  • How do you connect with your colleagues/friends/family? For example, do you use Facebook, LinkedIn, or Whatsapp often? Do you communicate via email? Do you belong to any groups, or share any hobbies? Do you go out to sporting events often?

The goal of these questions is to get a feel for where your customers go, and how they prefer to communicate. Chances are that, if 8-12 of your best customers use a particular platform, participate in a given activity, or frequent a particular place, there will be other potential customers there as well.

“We’re Small, So…What About Free Stuff?”

Sure, when you are small, and/or marketing budgets are tight, you need to consider what you can do for free—for example, engaging on social media platforms and taking advantage of your email list, however big or small.

Your email list is especially valuable because you know the people on it are voluntarily receiving your emails. They see value in what you offer and probably want to buy from you in the future. (Likewise, those that unsubscribe give you good data on when and where you should try doing something differently.) Just as important, you have control of that list. There is no fear that the list will change when Google changes its algorithm, or Facebook changes its layout.

So, if budget is tight, just focus on consistent output—consistent emails to your subscribers, and consistent content to your social media followers. For example, make sure they learn to expect an email from you every Monday, filled with valuable insights and engaging content. Do it right, and they will look forward to hearing from you…and buying from you.

Setting Your Marketing Budget with Pace

Most business owners have a to-do list that seems infinite—and figuring out precise numbers for marketing spend seems like a speck of dust in comparison. But getting this wrong is the number one way companies fritter away their hard-earned money.

If the very idea of putting together a marketing budget puts you to sleep (or gives you anxiety), come talk to us here at Pace. We can offer you some solid guidance and help you allocate your budget to reach your marketing goals.

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