A key to a successful marketing strategy is to have an efficient budget. If you are just starting out in business or have limited experience in marketing, it is easy to get overwhelmed at the prospect of deciding where to allocate your funds.
Why Do I Need a Budget?
A marketing budget should serve two vital purposes:
The first is to ensure that you have enough resources to accomplish the strategy you’ve set for your business. If the
numbers don’t match, you need to prioritize your marketing efforts.
The second purpose is to help you track the return on your investment. You need to know exactly how much you spent on
each marketing avenue to determine how much you made from that approach.
The process of creating a digital marketing budget doesn’t have to be complicated to tell you what you need to know. Let’s break down the process of creating an efficient budget.
Step #1: Setting Goals
Before you do anything, you need to establish what you want to accomplish with your marketing. Your goals will be unique based on your market and your industry. You want to have a combination of long-term and short-term objectives before you start working on your budget. Without that direction, how will you know if you’ve been successful?
Try this exercise: Write down your goals for six months, one year, three years, and five years down the road. Once you have your list, check each of your goals against the following parameters:
1. Is this goal specific? Is it significant? Does it stretch me to my potential?
2. Is this goal measurable? Does it motivate me?
3. Is this goal attainable?
4. Are there actions I can take now to get closer to achieving this goal?
5. Is this goal reasonable?
6. Is there a way to track my progress toward this goal?
7. Can I give this goal a deadline?
Once you have pinpointed your goals, it’s time to get to work!
Step #2: Set Your Total Annual Budget
If you are just starting out, this can be a difficult task. The standard rule is 6-10% of your revenue (or projected revenue), depending on your industry. However, today’s tech businesses are using up to 30% or more of their annual revenue on marketing outreach. It really depends on your comfort level.
Regardless of what you decide, using this percentage model helps you grow your marketing at a sustainable rate. Once you have your first year under your belt, you can continue to invest more into your marketing as your company grows.
Step #3: Do Your Research
There is a level of trial-and-error in marketing. However, you can reduce this and be more efficient with your budget if you do your research ahead of time. Take the time to thoroughly review your industry, current trends, and study the behaviors of your target audience.
In this stage, you should create buyer personas detailing your key audience segments. Buyer personas will help you identify exactly where your ideal customers get their information, what (or who) influences them, and what problems you can solve.
You should also reach out to a variety of marketing and advertising providers to get an idea of the cost to promote your business on the platforms your target audience prefers. The more information you can find upfront, the easier it will be to set a budget that works.
Step #4: Set Your Strategy
Once you know all about your target audience, and the cost of marketing through different avenues – you’re ready to build a strategy.
Consider: Out of the platforms that your audience is using, which are in your price bracket? What are your competitors doing? How can you set yourself apart?
A good rule of thumb is to pick at least three different marketing outlets. That may be a dynamic website, social media, and search engine optimization. It may be a website, social media, and a TV ad campaign. You can always add more outlets, but if you’re just starting out – don’t be afraid to focus your efforts in a few avenues that you know will work.
Step #5: Allocate Funds
Once you have your strategy and a general cost breakdown for each approach, you can earmark portions of your budget for each segment of your marketing. Be sure to factor in one-time fees like design as well as monthly and annual fees. Remember, the running of the promotion is only half the battle! Will you outsource your content development, or will you come up with original social media and blog posts yourself? Do you want a starter website, or are you going to invest in a snazzier presentation?
There is no wrong answer, but keep in mind that each of these items has a substantial impact on the budget you will have left over for the actual promotions.
Step #6: Update Often
A lot can happen within a small business in a year. Priorities change. Opportunities change. Cash flow will change. It makes sense that your budget will change during a year. Revisit your budget every month, and make sure you are staying on track. The more in tune you are with your budget, the easier it will be to make smart choices when critical decisions or opportunities arise.
Need help creating your annual strategy and budget? Heeren Content & Strategy offers a variety of services to fit the unique needs of small businesses. Schedule a free consultation!
Contributor: Erika Heeren is the founder of Heeren Content & Strategy and serves as Project Manager for Wright Stuff Radio. A 14-year marketing and public relations veteran, she has a professional focus on integrated media spanning 16 different industries. She works with small businesses and non-profit organizations to provide affordable, professional-quality content development, marketing, and public relations services.