Is your spending on marketing sufficient? According to a recent survey, if you like many of your collections, the answer is yes. 42% of the marketing budget is less than 5% of the revenue mark. In fact, only 38% of companies spend enough on marketing to meet industry standards, and only 36% believe that they spend enough to succeed according to their own standards.
This is not a beautiful picture of the marketing budget situation that most of us face. As we organize our marketing budgets, we often face the funds to build and validate our plans, and may be confused about how to handle them. Some of you only need to get a budget from management. Others receive a percentage of past or projected income, while others are still told to submit a budget approval plan.
In fact, there is only one place to start - a strategic marketing plan. Once you understand the goals and strategies of your marketing efforts, you can better budget. Having said that, there are three ways in which the budget process should be considered... they are not mutually exclusive.
top down
Using a top-down approach, you can start with a budget number that is "down" by financial or top management. You have $X spent, you take this number and allocate the funds to months. To do this, check out your company's seasonality [a few months of marketing activities that require more people than others], sales quota allocation and sales cycle.
We recommend that you ask the management team for a commitment to the percentage of revenue for the "top-down" budget number. This makes marketing more responsive to revenue goals, and predicts that dollar figures can be any number and can be increased or decreased at will. Instead, it should only be adjusted as income expectations increase or decrease. As a guiding principle, our survey shows that 30% of companies spend 3-5% of their revenue on marketing, and 45% spend more than 6% [most of them between 6-10%]. If you are launching a new product, or are expected to enter a new market or sector, it is expected to spend approximately 20% of your revenue to fund the program.
The general rule of use of the percentage of revenue method is 8-10% of marketing revenue, of which about 5% is used for labor [department or outsourcing to marketing companies]. The percentage you use depends on a number of factors, how mature your market is [how much education you need to do], the level of company awareness in your industry [whether you are a new company or an established business, how big a brand is] you must do this Do, and the speed at which you plan to grow, to name a few. Calculate the "allowed" monthly budget for marketing after you receive management's commitment to your percentage of revenue each month.
bottom up
Once you've built a top-down number, set it up and review your budget in a bottom-up manner. That is, look at the specific activities you plan to launch, how often you plan to start them, and then calculate the cost of each item in the current month. You need to break this down into several key categories for reporting and tracking [ie staffing, branding materials, promotional materials, websites, promotions, and PR] and adding each activity under its applicable segment. Once you have calculated the "real" cost of the proposed program, compare it to the top-down numbers. Then let the negotiations begin.
Expected return on investment
In every budget negotiation, the negotiations will always return to one thing - what is the return? Although it's often difficult to calculate when it's converted to sales, there are some techniques you can use to validate your marketing plan before implementation, and these techniques can also be used to measure it during and after execution. To calculate the expected return on investment for your marketing plan, you need to develop key assumptions in the Marketing ROI Calculator. From there you should be able to estimate how many potential customers your program should generate [given the message, the right vehicle mix, the right target market, the solid product offering, etc.], how many customers you should convert, and thus predict your return on investment.
The budget process is something that our "creative" marketers sometimes fear, so they don't spend enough time thinking about it. However, with a reliable strategic marketing plan and the above budget approach, you will get the resources and direction your company needs to build a marketing budget.
Orignal From: Solve marketing budget process issues
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