How to set a marketing budget.
It's that time of year again. At this point, you should be finalizing your 2018 goals and give your written marketing plan a final review. But wait, "what about the budget"?
The dreaded "B" word sends chills down every business owner's spine - it can only mean that we'll be spending money...again.
It's time to change the negative connotations brought by the mere mention of a budget. It's a cat-and-mouse game, right? An opportunity for the "little voice inside your head" to take over; "If I say $50,000 they'll spend all of it, so I'm just going to cut it in half."
Bad idea. What if $50K gets you closer to, or even beating your growth objective?
The fault lies with an improper construction of a marketing budget. I never believed in setting a percentage of sales as a budget - it is an arbitrary number that makes no sense. In most cases, it will cause owners to simply back off and pick an unreasonably low (arbitrary) budget.
Here's how you overcome the tension and ultimately unrealistic selection of a marketing budget:
- You must have a written and very detailed marketing plan.
- The execution part of the plan will include a list of marketing tools (platforms) to support the state goals and strategies.
- Each item will have a corresponding budget. For example:
Trade Shows - $8,000
Pre-Show Marketing: $2,500
Facebook Advertising: $6,000
Google AdWords: $3,500
Website Update: $7,500
Email Marketing: $3,000
Direct Marketing: $3,300
Budgets are built from the ground up and only after a detailed marketing plan has been developed. If the final number is not approved, go back, prioritize the items and eliminate those costs where the R.O.I is questionable or has been historically low.
TIP: For each marketing "expense" you must analyze your "customer acquisition cost" (for example, your FB ad dollars) vs. The Lifetime Value of a new customer. You'll also need your historical "conversion percentage" - what is the percentage of leads that convert into new business. If you don't have those metrics, then proceed with caution by testing each platform until the data tells you what is working.