Marketing Budget

How to determine your marketing budget

Marketing Budget

How to Determine Your Marketing Budget

This how-to guide explains how to determine your marketing budget and gives you hard-to-find data on marketing costs so you can figure out what you can afford.

You can determine your marketing budgeting many ways. Here are the most common:

“Here’s what we can spend.”
“Here’s what we spent last time.”
“Let's match what our competitors are spending.”
“Let's spend a percentage of gross sales.” (Generally from 1-10%)
All of the above

A better way to determine your marketing budget

Hire an objective marketing consultant or agency to help you understand options and trade-offs

From our experience: Ad agencies will promote advertising. PR agencies will promote PR. Direct mail experts will promote all kinds of direct mail. And as a business owner you probably have your own biases and ideas about what type of marketing you want to do. All of you are biased. You need an objective person who understands the pros and cons of all types of marketing, ideally also with experience in marketing for other clients to reach the same target audience(s) you want to, and an understanding of your industry and specific type of business. They need to work through costs, options and trade-offs of your marketing mix to present you with options. There is no "right answer." But there is a great value in having someone advise you who is neutral, objective and experienced. That can be a full-service marketing agency or an experienced freelancer. Working with Agencies and Freelancers and Find Marketing Experts to Hire are good places to start.

Don't want to spend the money to hire someone to help? Then understand the typical costs of marketing so you can figure out what you can (and can't) afford.
- Costs for Marketing

Start with developing a marketing plan
- How to Write a Marketing Plan
- Small Business Marketing covers the fundamentals you want to have in place before you spend money on marketing programs.

If you choose to advertise, it's generally the most expensive part of your marketing budget
- How to Determine Your Advertising Budget

Know this: Spreading your budget too thin doesn't work. Start with understanding what it costs to achieve minimum effectiveness level for each marketing activity. For example, in advertising, that means reaching at least 70% of your consumer target audience when you are advertising and for them to have the opportunity to see an average of three ads during a four-week period. Knowing minimum effectiveness levels allows you to understand how far your marketing budget can go, and which marketing activities are within your reach. This will be a good start for the balancing act that you need to do with your budget.

TIP shared by a small business owner: After more than 20 years of marketing, I've developed a "4 Rs" formula to help me allocate where I spend my marketing dollars, and how to justify asking for more. The 4 Rs are Return, Reach, Repeatability, and Reputation. Do I get a good, or even great Return on investment? Do I have a broad reach, or only get access to a small part of my market? Do I have the ability to repeat this tactic over and over, and still get the high ROI and broad reach? And do I build our brand's reputation at the same time generating leads? Using these 4 Rs, you can continue to test, measure, and shift your marketing dollars for the greatest effect.

Typical marketing costs

People costs for agencies and freelancers
Creative costs to come up with ideas
Testing and market research costs
Production costs
Printing costs
Fulfillment costs (for some types of marketing)
Advertising media space costs (this generally represents 80% or more of your total ad budget)
Promotional costs for offers and incentives
Travel

These articles will help a lot

A huge benefit of being a MarketingZone Premium Member is that we've done the work to gather typical costs. This will make it much faster and easier for you to figure out what you can (and can't) afford.

Costs for Marketing has costs for advertising, email marketing, direct mail, websites, printing and more.
Working with Agencies and Freelancers has articles about the costs for agencies that explains how they are paid; plus costs for hiring freelancer graphic designers and copywriters.
Budgeting for Marketing has articles on the best free and low-cost options and tips on how to save money.
Find Marketing Experts to Hire

The ClippingZone
The best marketing articles, blog posts and reports from around the web

Branding in the Digital Age in Harvard Business Review says "You're spending your money in all the wrong places." They claim the purchase process has changed dramatically because of social media and the ease for people to get referrals from their friends and online connections. "Consider this: Not long ago, a car buyer would methodically pare down the available choices until he arrived at the one that best met his criteria. A dealer would reel him in and make the sale. The buyer’s relationship with both the dealer and the manufacturer would typically dissipate after the purchase. But today, consumers are promiscuous in their brand relationships: They connect with myriad brands—through new media channels beyond the manufacturer’s and the retailer’s control or even knowledge—and evaluate a shifting array of them, often expanding the pool before narrowing it. After a purchase these consumers may remain aggressively engaged, publicly promoting or assailing the products they’ve bought, collaborating in the brands’ development, and challenging and shaping their meaning."

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