Marketing is an essential element of fostering business growth and scalability. And carefully crafting a budget requires companies to understand their cash flow to determine what can be sustainably allocated to marketing tactics.
An effective business marketing strategy is two-fold - having a set plan for the actual promotion, advertisement, and sales funnels, and the budget breakdown to allocate to each element.
For new companies, the suggested budget for successful marketing processes is 12-20% of gross revenue. When a company becomes more established, however, the marketing budget can lessen to 6-13%.
Allocation for the Marketing Budget Breakdown
The following elements need to be considered when a company is creating their marketing budget breakdown. Taking into account these key marketing avenues is essential for businesses to ensure that they are leveraging various tactics to reach their ideal audience.
- Software - Expenses involved with creating digital and print media, as well as other automated promotional processes like email funnels or communication for customer loyalty programs.
- Freelancers/Employees - Costs involved with working with per-project marketing experts on specific campaigns or hiring a marketing agency to handle this side of the business. Alternatively, this can involve wages associated with paying an in-house marketing team.
- Paid Advertising - Allocated spending (daily, monthly, per-click, etc) for online channels like google ads, sponsored content, youtube ads, social media promotions, etc, as well as some print advertising.
- Content Creation - Web content such as blog posts, videos, photos, etc that focus marketing efforts on Search Engine Optimization (SEO). This will involve costs such as the content creator's wage, as well as production costs, in cases where video or photography is required.
The Importance of Digital Marketing
As the modern landscape of consumerism continues to be geared towards online channels of advertising and purchasing, it's necessary for companies of any industry to direct efforts towards digital marketing. The following statistics explain the rising digital marketing trend-
- The online marketing realm is projected to rise by 45% by 2020.
- The fastest-growing category of online marketing is video marketing, which is expected to be double of 2016's online marketing video spend by 2021.
- 25% of digital marketing spending is for social media advertising.
- More than 50% of companies claim that they had received their highest return on marketing investment on search-related marketing tools, like paid search, content marketing, and SEO-driven digital advertising.
6 Key Elements of a Marketing Budget
It can be common for companies to forget about some key areas in their estimated cost of marketing if there isn't a detailed understanding of all of the avenues available to them, such as automation software, or intelligent content creation.
Therefore, businesses should consider which of these following elements would offer their company model more successful engagement and sales when determining their marketing budget allocation.
1. Paid Marketing
Contrasted to organic marketing, which is where content is released by your company for an audience to naturally find and share, paid marketing is geared to a targeted audience. This involves ads and content being put in the line of sight of a chosen audience.
It's an upfront sales focus which engages audiences to click' to be directed to a site, to download, message, purchase, or more. For example, the most common types would be google and Facebook ad spend.
2. Content Marketing
As one of the most common marketing tactics, content marketing is when a brand promotes its product or services through online materials such as videos and blogs. The goal of content strategy is to create information and entertainment through these channels for people to find, view, and share.
This is a form of organic marketing, working as a funnel to expose an audience to the brand to develop authority in the chosen industry. In terms of budget considerations, a company would need to factor in the hiring of content creators as well as any fees for posting content on popular websites.
3. Public Relations (PR)
PR is the most valuable tool to use when attempting to create a trusted image in the chosen industry. There are two main forms of modern PR techniques that companies could invest in, off-page SEO and Influencer Marketing.
Off-page SEO is when a brand's content and advertising are taken to other sites - often through a link that is positioned on high-traffic websites in the same, or similar, industry. The trick here is to invest in relationships with authoritative websites to backlink to your site, as it will enhance your website ranking in search engines while also driving traffic to your website.
Influencer marketing is an industry in and of itself, with social media being responsible for the boom of influencers fostering brand relationships. The influencer could be a trusted authority in the field, a celebrity, or a sports figure for example. The costs involved in this marketing channel would be the fees to pay influencers for advertising the brand or product, along with the products that are given to them.
4. Customer Referral Programs
Referral programs involve customers receiving rewards for sharing the brand or product as well as any purchases made from this referral. This is often exchanged with monetary value for future purchases, though sometimes it can be paid as funds as well.
To factor this brand awareness tactic into a marketing budget breakdown, businesses would need to consider the cost of building and maintaining the program (web designers, copywriting, etc), as well as expenses that come under chosen program rewards.
5. Marketing Tech Stack
This term describes all of the tools that can be used for marketing. Companies will have a set of specific applications that are used in different phases of the marketing plan. Ideally, tools are integrated to work together, to provide efficiency and accuracy, especially when data is linked through marketing automation so that performance is tracked and stats can be used for future decision-making.
Marketing resources in the tech stack tools category include email management systems, analytics tools (such as conversion rate optimization), social media management apps, customer relations management systems, and content management applications.
6. Marketing Events
Planning certain events will effectively come under the marketing budget breakdown. Some events could be considered a business cost, though there are many events that are held for the sole purpose of promoting the brand (i.e product launches). This means that the total marketing budget would be allocating funds to marketing campaigns focused on brand events.
These events could include trade shows, conferences, conventions, workshops, and even online events such as webinars and summits.
The Bottom Line for Marketing Budgets
With this marketing budget information in mind, companies can begin the process of crafting a plan based on set goals and milestones. It's important to note that the entire marketing budget is still just one piece of the company's overall budget.
In order to assess how much a company spends successfully marketing, it's necessary to have a clear understanding of financial data, not only in the present circumstances but also through financial projections.
Therefore, to create a sustainable budget for marketing planning, leveraging forecasting tools can offer businesses insight into potential cash flow and profits to put back into the budget in order to grow at a healthy pace and avoid over or under-estimating marketing costs.