Creating a marketing budget is a lot like baking a cake. First, get a recipe for the kind of cake you want to bake. Next, inventory the ingredients you have on hand, and make a list of what you need that isn’t already in your pantry. Then, purchase the ingredients and bake the cake.
When you’re creating a marketing budget, instead of ingredients, you’re gathering resources, tools, and activities. And instead of ending up with a cake, you end up meeting business objectives. Here’s a simple recipe for creating a marketing budget in six steps:
1. Identify the business objectives you aim to hit. These will typically come from a business plan or a marketing plan. Describe at a high level what your company is working to accomplish next year. Some business objectives might include “increase sales by 20 percent” or “expand our geographic reach to two new states.”
2. Tie each relevant business objective to a marketing objective. Some business objectives might not be relevant to marketing. For example, if your company has a goal of reducing employee turnover by 10 percent or improving manufacturing efficiency, you don’t have to persuade customers to help.
For the goals that are relevant, you need to convert a high-level objective into a specific marketing goal. If the objective is “increase sales by 20 percent,” the marketing goal might be “sell $2 million worth of products.”
3. Build your marketing conversion funnel. How do you get from your goal to a marketing budget? Begin by analyzing the intermediate goals you’ll have to hit on your journey to the main goal.
If the overarching goal is to sell $2 million worth of products, how many customers is that? How many e-commerce visitors does it take to get one customer? How many total website visitors to get one e-commerce visitor? How many ad views to get one visitor?
Many people struggle with this step. It requires a lot of assumptions and “guesstimating,” which is OK. No marketing plan or budget is perfectly accurate. As long as you remain flexible when executing the plan, it’s OK to approximate. Being off and recalibrating is part of the marketing process.
4. Determine which tactics you’ll need to hit your targets. This is where creativity really takes off. There are hundreds, maybe even thousands, of ways to hit every marketing target. Use your marketing plan, and the skills and resources available to you, to guide your marketing budget process.
Performing a marketing resources inventory is extremely helpful when deciding on specific tactics. This will help you understand which tactics might work best, given the resources you have. Make a list of the people, tools, technologies, and abilities/knowledge available to you, then base the tactics you choose on that availability.
For example, if you need a copywriter but already have someone on staff who enjoys writing, let them try the job. This could decrease the cost of content marketing dramatically while developing new talent on your staff.
Examine your results from previous marketing campaigns. Which tactics have worked well for your company in the past? Which initiatives have had the best results? Use that specific knowledge to decide if, for example, you want to focus on SEO or pay-per-click ads to get users to your website or into your store.
5. Price your marketing tactics. Now that you know what you need to do and how much of it you need to do, you can put a price on the tactics you plan to use.
Some prices will be simple to calculate. If you have two marketing employees each working 40-hour weeks at $25 per hour, your personnel budget will be $104,000 for the year.
Other calculations are more complicated. Pricing video creation, for example, can be complex if you’ve never done it before. Luckily, there are plenty of resources online to help you estimate how much each piece of your budget will cost.
It’s important to add labor, tools and equipment, travel, and other miscellaneous costs to get a realistic budget. If you’re planning to hire a new marketing coordinator, for example, remember that you’ll also need to get them a computer, access to your marketing software, and spend time doing interviews. Overlooking these administrative and support costs can throw off any marketing budget.
6. Reconcile the budget. Now that you have an ideal budget for what you want to accomplish, you have to reconcile it against the funds that are available. While every marketer dreams of having an unlimited budget, few CEOs will approve one. The final step to creating a marketing budget is making it fit the overall company budget.
That might mean scaling back some activities or revisiting step four to change things around. It might mean doing more with the resources available while postponing dream projects. Or it might mean increasing marketing plans if there’s more budget available than you’ve accounted for!
That’s all there is to creating a marketing budget. As you gain experience, the process will become faster and easier. You’ll learn what strategies and tactics work, how much they cost, and how to implement them in the most cost-effective way. Until then, this six-step process will get you on your way to a functional and effective first marketing budget.