Best practices for allocating marketing budget
Building a marketing budget is one of your most important — and often, most daunting — responsibilities. The money in your marketing budget is finite, and how you allocate each dollar can make the difference between a thriving marketing program and a failing one.
According to Econsultancy, marketing budgets have been steadily rising since 2011. With more money to spend — and more ways to spend it — it’s easy for marketers to get overwhelmed by budgeting.
Thoughtful evaluation, ROI tracking, and accurate data are key to taking the guesswork out of allocating your marketing budget.
Set marketing goals, and let them guide your strategy
The very first step to properly allocating your marketing budget is establishing revenue goals, alongside the strategy that you will deploy to reach those goals. Regardless of your industry, your purpose as a marketing team is to reach or exceed a revenue goal as efficiently as possible.
Every decision that you make should be driven by your goals, and this is especially true when it comes to spending the finite amount of money in your marketing budget. For example, if you’re mapping out a marketing budget for a brick-and-mortar shoe store, your goal is to reach a certain amount of shoe sales by the end of the year. As a brick and mortar luxury shoe store, you likely employ salespeople who play a part in generating sales so you can spend a bit less on pure marketing efforts.
On the other hand, an e-commerce shoe store will allocate their marketing budget very differently compared to other businesses. They still need to sell a certain number of shoes to reach their revenue goal, but they may choose to spend a greater amount on programmatic marketing or email marketing since they don’t have a staff of agents dedicated to driving new sales.
In other words, while the specific strategy will vary from business to business, revenue is always top-of-mind when determining your marketing spend.
Accurately measure ROI and marketing results
When planning your marketing budget, you’ll want to evaluate the success of each of the marketing channels you’ve leveraged over the course of the previous business year. And in order to do that, you’ll need to answer at least three key questions:
- Which expenditures generated good leads for your sales team?
- Which channels didn’t help to move the needle towards your revenue goals?
- Is there marketing technology that you can cut?
Ask yourself these questions as you explore the line items in your budget. While it’s helpful to evaluate last year’s budget at a high level, it’s important to also closely consider the number of leads or sales that each marketing campaign generates in relation to the cost of the campaign. Let’s say that you run advertisements on a podcast and on a radio program. The podcast generated 1,200 leads and the radio program generated 2,000 leads.
At first glance, it seems as though it would be wise to allocate more money for running advertisements on the radio. However, when you look more closely at the data, you see that you spent $8,000 on the podcast ad placements and $15,000 on the radio placements. This means that each lead from the podcast cost you $6.60 and each lead from the radio ad cost you $7.50.
Knowing the cost efficiency of each channel, you’ll likely choose to allocate more marketing dollars to podcast advertising in your next marketing budget — exactly the sort of thoughtful approach you’ll need to take as you balance your next round of marketing spend.
Assemble your toolbox and build a marketing stack
Now that you’ve laid out your marketing goals, evaluated last year’s marketing efforts, and taken current marketing trends into account, you’re ready to implement an airtight marketing budget. During the course of the year, you’ll want to make a concerted effort to monitor the success of your marketing campaigns so that you make any necessary changes.
There are a number of tools available to help you measure ROI. Google Analytics and Ads are essential for marketers who want to measure the success of their organic traffic and online campaigns. CRM software such as HubSpot and Salesforce gather information about your leads and customers to help you determine which marketing efforts yield the greatest results for your business.
Finally, call tracking software uses online and offline campaign tracking to help determine which are leading to phone calls and conversions, allowing you to focus your strategy on what drives high converting calls.
Call tracking features like CallScore help to automate your data analysis by quickly identify which marketing campaigns are leading to sales.
Use data-driven marketing to support your decisions
Additionally, a close examination of the data in your own marketing department, it’s important to take into account marketing trends that occur industry-wide.
Here are some industry-wide marketing budget trends we’ve observed in recent years:
- Digital marketing spending has been steadily increasing for years and there are no signs of this slowing down. In fact, Forrester Research predicts that marketers will spend at least 42 percent more on each digital marketing channel this year.
- According to Forrester, search marketing will make up the largest chunk of online marketing budgets. 71 percent of respondents to an eMarketer survey said that they expect to increase their spending on Google Ads, confirming Forrester’s prediction about increased search marketing spending. Display advertising will take the second largest share of online marketing spend as more companies adopt online video and interactive banner ads.
- Once seen as a content afterthought, video will become increasingly more important in the years ahead. Forrester Research found that including video in emails resulted in 200 percent to 300 percent increase in click-through rates.
- While search marketing and video continues to make up increasing shares of marketing spending, eMarketer reports that social channel marketing spending is slowing down, with the exception of Facebook. Less than half of respondents to an eMarketing survey plan to increase spending on Instagram, Twitter, or Snapchat.
- As in years past, content marketing is still a key part of a successful marketing strategy and although it is one of the most effective marketing tactics, it consumes a fair share of marketing budgets as a result. The Content Marketing Institute reported that B2B marketers spend on average 28 percent of their marketing budget on content.
Trends and best practices in marketing budget allocation vary from industry to industry, and from year to year. As with many other aspects of the marketing game, part of the budgeting process will likely always involve a bit of uncertainty and informed guesses. However, the key is to rely on as little guesswork and gut intuition as possible, so you can be confident that your marketing dollars are being spent efficiently.