Setting Your Marketing Budget: 5 Key Steps to Take

Originally published: April 04, 2021 08:23:42 AM, updated: April 04, 2021 09:25:10 AM

Budgeting for Marketing

In the digital age, the significance of marketing has soared to new heights. Vast new, tech-savvy audiences and innovative technologies present unprecedented marketing opportunities, as well as unique challenges. However, despite its evolutions, marketing remains static in its goals; it seeks to drive more sales in a cost-effective manner. To ensure the latter, marketing depends on optimal return on investment (ROI), which in turn necessitates optimal budgeting. This is arguably always a challenge, regardless of one’s business’s size, industry, or scope. Thus, let us explore five key steps to take toward setting your marketing budget wisely.

Setting Your Marketing Budget

There are multiple benefits to budgeting your marketing efforts effectively. It helps ensure proper budget allocation, informs long-term strategies, and offers an investment into business growth. With these in mind, every step of the process is crucial and can have overarching effects.

#1 Set SMART goals

The very first step, typical as this suggestion may be, is to outline your goals thoroughly. Setting clear, measurable goals from the beginning will help identify your exact needs and allow you to monitor progress. This philosophy behind setting goals is typically defined in the S.M.A.R.T. acronym:

  • Specific – how specific are your goals?
  • Measurable – are they readily measurable through specific key performance indicators (KPIs)?
  • Attainable – are they attainable with your current infrastructure and resources?
  • Realistic – are they realistic in relation to your place in the market?
  • Time-bound – do they adhere to strict timetables?

As such, goals like simply “boosting user engagement” doesn’t adhere to SMART goal standards. Being SMART, this goal would be broken down and formulated like this instead:

  • “Decrease bounce rates for key landing pages by 10% in the next six months.”
  • “Increase user shares for marketing content by 20% by Q4.”
  • “Improve page loading speed from 5 seconds to 3 or less within four months.”

Moreover, it is noteworthy that marketing goals will vary significantly and require different approaches and budgets. In brief, consider three among the most common ones:

Boosting user engagement

As outlined above, boosting user engagement is a common, multi-faceted goal. It lays the foundation for more profitable marketing through customer segmentation, customer retention strategies, and more. To engage your clients as much as possible, your strategy may range from on-page SEO to loyalty programs and more.

Raising brand awareness

The perennial goal of marketing, raising brand awareness is crucial toward improving online visibility. It helps generate more qualified leads that drive conversions and sales. Such strategies may include social media marketing, PPC advertising, and more – each with its own budgeting needs. Adhering to SEO ranking factors is also a typical practice toward this goal.

Increasing conversions

Finally, it may be that a marketing campaign successfully raises brand awareness and incites engagement, but conversions still underperform. In that case, strategies will typically steer closer to refining one’s sales funnel and improving high-value converting content. Enhancing the overall user experience (UX) also overlaps with conversions but usually comes with higher budget demands.

#2 Establish your sales cycle

Having outlined how establishing goals is crucial to setting your marketing budget, the next step is to establish your sales cycle. This will help inform your decisions, monitor your efforts, and readjust your budget accordingly.

The sales cycle is typically divided into 4 phases:

  • Awareness – when your audience becomes aware of your offer
  • Consideration – when leads begin to analyze the available options
  • Decision – when prospects decide to proceed with a purchase
  • Action – when leads convert

Notably, some marketers may fuse the consideration and decision phases. Moreover, subscribers of the flywheel model may expand on the action phase to include post-sale engagement.

In either case, establishing your sales cycles should let you pinpoint exactly where your budget needs to be allocated. Customer segmentation tools like Customer Relationship Management (CRM) software can also enable customer journey mapping, allowing for funnel refinements.

#3 Conduct a SWOT analysis

On the subject of introspection, you will also need to conduct a thorough analysis of your business standing. Such analyses typically subscribe to the S.W.O.T. acronym:

  • Strengths – which advantages does your company have over the competition?
  • Weaknesses – which areas can you improve on?
  • Opportunities – which opportunities can you take advantage of?
  • Threats – which factors may present obstacles to your business’s growth?

Especially in the context of setting your marketing budget, these insights allow for a better overview of your competitive position. This is why competitor analyses frequently follow SWOT analyses, as companies monitor their competition. These practices can help you better evaluate which tools and strategies work best for your field, informing budgeting decisions.

#4 Analyze industry trends

Delving into outside opportunities, then, it is equally crucial to analyze industry trends. Such trends may be circumstantial, like the currently ongoing COVID-19 pandemic, seasonal, or natural and gradual. Significantly, technological innovations may also fuel industry-wide trends for marketers to monitor.

Perhaps the most notable type of technological trend lies in marketing automation. Indeed, such software as CRM often provides email automation tools, and other marketing automation assets abound. Similarly, an eCommerce store may now benefit significantly from live chat, while B2B agencies may hyper-focus on select social media. It is thus imperative that you identify such trends to inform your strategies.

#5 Formulate your marketing plan

Finally, having covered all of the above, you may begin to take action on your findings. Here, you may formulate your marketing plan with some critical questions in mind:

  • Do you have SMART goals in hand?
  • Do you know your ideal audience?
  • How much will your strategies cost, and what tools will they require?

Having analyzed your competitive position and industry, you should be able to formulate a specific plan with specific costs. With a concise plan, you may then begin setting your marketing budget accordingly.

Conclusion

To summarize, budgeting for marketing is a long process that requires due attention. It requires specific, SMART goals, a clear sales cycle, SWOT analyses, industry insights, and a solid plan. These factors will help outline your marketing needs and optimal budget allocations for maximum cost-efficiency.

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