Starting a new business is always a challenge, but it's especially difficult when you're trying to do it on a shoestring budget. One of the most important things you can do early on is to create a robust marketing budget and make sure that your money is being spent in the right places.
In this blog post, we will discuss some tips for building a marketing budget that will help your startup succeed!
What is a Marketing Budget
A marketing budget is a tool that businesses use to plan and track their marketing spending. By creating a marketing budget, businesses can ensure that they are spending their marketing dollars in the most effective way possible.
Marketing budgets typically include a mix of advertising, content marketing strategy, public relations, and promotional activities. The exact mix of activities will depend on the business's goals and objectives.
Typically, businesses will want to allocate a larger portion of their budget to activities that generate the most leads and sales. For example, if a business is looking to increase brand awareness, it may want to allocate more of its budget toward advertising.
Conversely, if small business owners are looking to generate more online traffic, they may want to invest more in their digital advertising efforts. By carefully planning their marketing budget, businesses can achieve their marketing objectives while staying within their overall budget.
How to build an effective marketing budget
Now that we've discussed what a marketing budget is, let's talk about how your marketing team can build a solid budget plan. When you're creating a marketing budget, there are a few things you'll need to take into account:
Once you have a good understanding of your marketing strategy, target customers, and planned marketing activities, you can start to put together your budget.
Here are 5 steps you can follow when building your marketing budget:
1. Define your marketing goals and objectives
The first step in creating a marketing budget is to define your marketing goals and objectives. What are you trying to achieve with your marketing efforts?
Are you looking to increase brand awareness, generate leads, or drive online traffic? Once you have defined your goals, you can begin to develop specific objectives that will help you achieve those goals.
For example, if you are looking to increase brand awareness, one of your objectives might be to increase the number of social media followers you have.
Examples of marketing objectives:
3 Examples of marketing KPIs
2. Estimate the cost of achieving your marketing objectives
Once you have defined your goals and objectives, the next step is to estimate the cost of achieving them. How much money will it take to run effective marketing campaigns that will help you reach your targets?
Keep in mind that not all marketing activities are created equal - some will be more expensive than others. An ad on TV at prime time will cost more than an ad in a local newspaper, for example.
As you estimate the cost of your marketing plan, be sure to consider both the short-term and long-term costs. Some marketing efforts, such as SEO, can take months or even years to show results.
Others, such as pay-per-click advertising, can provide immediate results but can also be more expensive in the long run.
It's important to carefully consider the cost of each activity and make sure that you are getting the most bang for your buck.
3. Allocate funds accordingly
Once you have estimated the cost of achieving your marketing goals, it's time to allocate funds accordingly. This step can be tricky, as you don't want to overspend on marketing while neglecting other areas of your business.
It's important to find a balance between investing in marketing and investing in other essential areas such as product development or customer service.
Here are key budget allocation areas
Advertising is one of the most important aspects of marketing, as it helps to raise awareness of your product or service and can reach a large audience. Advertising can be done through various channels, such as television, radio, print, online, and outdoors.
2. Public Relations
Public Relations (PR) is another important aspect of marketing, as it helps to generate positive publicity for your company. PR can be done through various channels, such as press releases, media relations, events, and social media.
3. Market Research
Market research is essential for understanding your target market and what they want from your product or service. Market research can be done through various methods, such as surveys, focus groups, and interviews.
4. Sales Promotion
Sales promotion is a great way to increase sales and boost revenue. Sales promotion can be done through various methods, such as discounts, coupons, contests, and freebies.
5. Trade Shows
Trade shows are a great way to promote your product or service to a wide audience. Trade shows provide an opportunity to meet face-to-face with potential customers and build relationships with other businesses in your industry
4. Track your marketing expenses
As part of your marketing budget, it's important to track your marketing spend so that you can see how well your campaigns are performing.
By tracking expenses, you can determine which activities are generating the most leads and sales and adjust your budget accordingly. This also helps ensure that you stay within your overall budget.
5. Review and adjust your budget regularly
Budgets are not static documents - they should be reviewed and adjusted regularly in order to reflect changes in business conditions and marketing objectives.
As your business grows and changes, so too should your marketing budget. Make sure to review and adjust your budget at least quarterly in order to get the most out of your marketing dollars."
How much should a startup spend on marketing?
Startups have a lot of expenses, and marketing can be one of the biggest line items in the budget. But how much should you actually spend on marketing?
That depends on a number of factors, including the stage of your startup, your industry, and your financial runway. Generally speaking, early-stage startups should allocate between 2 and 5 percent of their overall budget to marketing.
If you're a startup in the revenue growth stage, it's important to set your marketing budget as a percentage of projected revenue. That way, you can ensure that you have enough funds to execute your marketing plan.
Late-stage startups typically allocate between 8 and 12 percent of their total budget to marketing. This may seem like a lot, but it's important to remember that marketing is an investment that can pay off handsomely down the road.
By allocating the necessary funds for marketing, you'll be well on your way to building a successful business.
A recent study by Gartner indicates that the average marketing spend has increased back to the 10% zone in 2022 following a huge one-time decrease in 2021.
Changes in traditional versus digital marketing spending
As the marketing landscape continues to evolve, companies are forced to re-evaluate their marketing budgets. In the past, the majority of marketing spending was dedicated to traditional marketing efforts such as print ads, television commercials, and direct mail.
However, as consumers spend more and more time online, businesses are shifting their focus to digital marketing. This includes everything from website development and social media campaigns to SEO and content marketing.
While digital marketing is often more effective and efficient than traditional marketing, it can also be more expensive. As a result, many companies are struggling to strike the right balance between traditional and digital marketing spending.
The good news is that there are a number of ways to cut costs without sacrificing quality or results. One way to do this is to invest in marketing automation software.
This type of software can help you streamline your marketing efforts and free up some of your budget for other priorities. Additionally, you can save money by outsourcing some of your marketing tasks to freelancers or agencies.
And, of course, you can always cut back on certain marketing activities if they're not providing a good return on investment.
No matter what your marketing budget looks like, it's important to make sure that you're spending your money wisely. By carefully evaluating your target audience and objectives, you can create a marketing budget that meets your needs without breaking the bank.
Percentage Of Marketing Spend On Digital Marketing
According to Gartner's recent CMOs survey (May 2022), "CMOs have made the shift from digital-first to hybrid multichannel strategies. When CMOs were asked to report the proportion of their 2022 budget allocated to online and offline channels, online channels took the largest share (56%).
However, offline channels account for almost half the total available budget (see Figure 3) — a more equitable split than in recent years."
We can see a clear trend toward digital marketing as more and more companies allocate more budget to this channel. This is likely due to the fact that digital marketing is more effective and efficient than traditional marketing, and it can be easier to track and measure results.
Additionally, as consumers spend more time online, businesses need to make sure they're visible where their target audience is spending their time.
Which social media channels should I invest in?
There are a lot of social media channels out there, and it can be tough to know which ones are worth investing in. Here are a few considerations that can help you make the decision:
Answering these questions can help you narrow down which social media channels are right for your business.
Which Marketing Strategy Get The Best Results?
Marketing is essential for small businesses and startups that want to survive and thrive. But with so many different marketing strategies and tactics out there, it can be hard to know which ones will get the best results.
Here are a few of the most effective marketing strategies and tactics that you can use to boost your business:
Creating and sharing high-quality content (such as blog posts, infographics, videos, etc.) is a great way to attract attention (inbound marketing) and build trust with potential customers.
Search Engine Optimization
Making sure your website and content are optimized for search engines is essential for driving organic traffic.
Social Media Marketing
Utilizing social media platforms (such as Facebook, Twitter, Instagram, etc.) to connect with potential customers and create a strong online presence.
Sending out targeted email campaigns is a great way to generate leads and build relationships with customers.
Paid advertising can be an effective way to reach potential customers who are actively searching for your products or services online.
While it can be more expensive, traditional advertising (such as TV commercials, print ads, etc.) can still be quite effective in reaching certain audiences.
One of the best ways to outspend your competitors is by using sales funnels. One of the main objectives of a sales funnel is to increase the average cart value (ACV) in order to maximize sales.
How to track your marketing expenses
One of the most important aspects of any marketing campaign is staying within your budget. Whether you're working with a limited amount of funds or you have a generous marketing budget, it's essential to track your expenses carefully.
This can help you ensure that you're getting the most bang for your buck and it can also help you spot areas where you may be able to cut costs.
There are a number of ways to make sure your marketing money is being well spent. One of the simplest methods is to create a spreadsheet where you track all of your marketing activities and their associated costs.
Download our startup and small business marketing budget template here
This can be a time-consuming process, but it's worth it in order to keep tabs on your spending. Another option is to use marketing software like Plannuh that includes expense tracking features.
This can be a more expensive option, but it may be worth it if you need to track complex marketing campaigns. Whatever method you choose, make sure that you track your marketing spending carefully in order to stay within your budget.
Common marketing budget mistakes
Any business owner knows that marketing is key to success. But what many don't realize is that marketing comes with a cost. And if you're not careful, those costs can quickly spiral out of control. Here are some of the most common mistakes businesses make when it comes to their marketing budget:
By avoiding these common mistakes, you can ensure that your marketing budget is being used effectively and efficiently. And that's crucial for any business that wants to succeed in today's competitive marketplace.
Mobile marketing is one of the most effective ways to reach your target audience. With mobile devices, people are always connected and always available to receive marketing messages.
This marketing strategy can take many forms, including text messages, mobile apps, mobile websites, and mobile ads. One of the benefits of mobile marketing is that it allows you to deliver highly targeted messages to your audience.
You can personalize your messages based on the location, interests, and demographics of your target audience. This ensures that your message will be relevant and engaging.
Another benefit is that it is highly efficient and cost-effective. Because people are always carrying their mobile devices with them, you can reach them anytime, anywhere.
This means that you don't have to waste time and money on traditional advertising channels that may not reach your target audience. Mobile marketing is an essential part of any marketing strategy, and it should be used to complement other marketing efforts.
If you're not already using mobile marketing, now is the time to start.
Examples of Leading Startup Companies Marketing Budgets
Here is the strategy Slack is using according to its 2021 financial statements:
"We deploy a range of marketing strategies and tactics to drive initial awareness and adoption. These include brand advertising, public relations, digital marketing campaigns, free trials of our paid plans, product localization, in-product customer education, and a website designed to teach new users about Slack."
As we can learn from this quote, Slack uses an arsenal of marketing strategies to generate a constant flow of leads and paying clients. in 2021 they expensed $461 million on sales and marketing, which reflects 50% of their company revenue for that year ($903M).
Here is Coursera's marketing strategy to attract new students:
"Learners come to Coursera primarily through free or low-cost acquisition channels such as public relations, word of mouth, and search engine optimization.
We also derive a smaller percentage of learners through cost-efficient paid advertising channels including an affiliate publisher network and paid search. "
According to their 10-K report, Coursera's sales and marketing expenses were $57 million in 2021 representing 31% of their total revenue.g
Key marketing budget statistics
In order to make the most of your marketing budget, it’s important to first understand how it works and what changes are happening in traditional versus digital marketing spending.
Once you have a good idea of where your money should be going, you need to determine which social media channels will give you the best results for your business.
And finally, track your expenses and measure your return on investment so that you can continue optimizing your budget for maximum impact.
What was the biggest challenge you faced when creating or implementing your company's marketing budget? let us know in the comments below