How to Create a Marketing Budget

by Claire Parker, Staples® Contributing Writer

If your marketing budget has followed the same formula since the Clinton administration (gasp) or consists of a vague number floating around in your short-term memory (gasp again), we’re here to help.

“Marketing is a basic business function, similar to accounting and customer service — but I'd argue it’s even more crucial than those,” says Dorin Rosenshine, New York–based marketing consultant and founder of tracking analytics company “Creating a marketing budget is important because it forces business owners to take into account the cost of obtaining sales.”

Here’s some advice for creating a budget that’ll work for you — and lead to more transactions.

Have a Plan

Building a marketing budget requires more than math and accounting. Defining your business goals guides your thinking about the marketing materials and activities you need to spend on.

Jeff Kear, owner of Web-based software company Planning Pod in Highlands Ranch, CO, sticks to three “tried-and-true” practices to create a marketing budget:

1. Determine Goals: Interview yourself and colleagues with questions such as: Should the company grow or maintain market share? Do you want to find new customers or focus on finding more revenue from existing customers? “Questions like these will direct how you allocate marketing dollars and focus your tactics,” he says.

2. Assess Spending: A common rule of thumb for determining marketing spend is to use 7 to 10 percent of total revenues for a small business, 4 to 6 percent for an established business that wants to grow, and 3 to 4 percent for an established business that wants to maintain its position. This is similar to what the Small Business Administration recommends, assuming you have the margins to cover your expenses, including marketing.

3. Brainstorm Tactics: Prioritize all possible ways to execute your marketing plan based on available cash and staff resources. “Place a higher priority on tasks that are easy to implement, produce results and cost the least,” Kear says. “Build your marketing budget from here.”

Assess Success

With your marketing budget in place, keep a running tab so you can adjust finances and activities accordingly. That’s what Molly Reynolds, director of business development for Los Angeles–based Lucid Public Relations, calls the benchmark system, and she employs it to determine the success or failure of each campaign.

She starts off with low-cost strategies such as Facebook ads or general search engine optimization, then graduates to bigger-budget campaigns. That might be more expensive activities like radio spots, print ads or trade shows, but only if the initial effort is successful.

Reynolds institutes a six-month trial for each tactic, after which there’s enough insight to know whether to adjust, expand or drop. Monitoring in this way illuminates the costs and results of each activity and mitigates budget impacts. “If I lost money on a certain campaign, the overall yearly budget would not be affected,” she says.

Stay Realistic

Creating a realistic marketing budget gives you the power to track and compare activities’ results from project to project and year to year. “Using this data, businesses can optimize performance by directing funds to the most successful channels,” says Rosenshine.

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