A quick Google search will show you that the internet is not short on marketing ideas to grow your business. But, how do you know how much you should be spending to promote your products or services? We broke it down into 5 steps to create a basic marketing budget. Learn how to define what expenses are considered marketing costs to meet your business objectives.
Here are the 5 steps to creating a marketing budget as part of your marketing strategy.
1. Make a list of your current marketing expenses. This includes every dollar you are spending on marketing your business or acquiring customers for the last year. Below is a list of costs that are considered marketing/advertising and should be on your list.
- Business cards
- Website building and hosting
- URL cost
- Trade shows or networking
- Paid media as part of an ad campaign
- Social media creation/management (in house or outsourced)
- New business proposal development
- Events: sponsorships, customer appreciation, etc.
- Employee hours spent, including networking, sales and product promotion
This is not an exhaustive list of all the things you could be spending your money on, but it should get you thinking about ALL the expenses that are part of your current marketing budget.
Once you have recorded each item, add them up for a grand total.
2. Calculate 5%-10% of your gross revenue. You can use last year’s gross revenue or what you have projected for the current year. A good rule of thumb is your marketing budget should be in the range of 5%-10% of your gross revenue. If you are just starting out, creating a new brand/website or launching a new product or service, you will be closer to the top of this range. For companies that are maintaining growth or planning for a moderate increase, then they should expect to be at the lower end and closer to 5%.
3. Determine your customer acquisition cost. Take the total dollar amount you created in Step 1. This should be all the sales and marketing costs associated with acquiring new customers for 1 year. Then, total all the new customers you acquired during that same timeframe. Divide the total marketing cost by the number of new clients.
$10,000 (total sales & marketing costs)/10 (new customers)= $1,000 (the average cost for your company to acquire a new customer)
PRO TIP: This information is invaluable. Now you know how much money it takes to bring in one new client and what type of ROI you are looking for your marketing to achieve.
If you feel that your customer acquisition cost is too high, you can start to prioritize what marketing tactics are delivering and what might be too high of a cost at this time. It also helps you evaluate new marketing opportunities.
4. Evaluate where leads, website traffic and customers are coming from now. What are the best sources for quality customers and clients? What has been successful and why? Make a list of the top 3-5 sources and tactics. Could you stop doing the other promotional strategies and still pull enough quality leads or buyers? Based on your 5%-10% range, does this leave you room to increase some of these or try new things? How does this compare to your customer acquisition cost?
5. Balance your marketing spend based on your business objectives. There are a lot of shiny objects out there when it comes to marketing, but you have to stay focused on what is going to help you achieve your business goals. Are you trying to build brand awareness? Are you launching a new product? Refreshing your brand? Driving sales for your top 3 services or products only?
Based on your goals and your target audience, you will need a balance that fits your budget and objectives. Remember to consider ALL marketing, both traditional and digital. Good old-fashioned networking is a key ingredient in many strategies. Does it make sense for you? Do you need to be all in on guerilla marketing with yard signs or lighting it up on social media? Be sure to do what’s right for your business and understand that it’s typically a combination of few things to attract your ideal customer.
Marketing strategy for scaling companies is one of our specialties here at Novella Brandhouse. Grab a spot on our calendar to discuss how we can help.