Your 2023 Marketing Budget Guide
‘Marketing budget’ are two words that are known to strike fear in many a marketing leader. But knowing how to set a marketing budget really doesn’t need to be that stressful.
It’s no secret that far too many companies underspend when it comes to marketing, while some spend far too much in all the wrong places.
Gone are the days of guessing, throwing as many ideas at the wall just to see what sticks. Not only is this approach ineffective and tiring, but it’s expensive.
That’s why we’ve done the research to create the ultimate guide on how to set a marketing budget in 2023, and how much a marketing budget should cost your company.
Let’s get into it.
Why do I need a marketing budget?
Setting aside a dedicated budget is essential if you want to be successful in your marketing efforts. It helps keep track of how much money is being spent, how it’s being used, and how effective each campaign is. By understanding how much money you have to spend on marketing, you can plan your activities accordingly and avoid any surprises or setbacks further down the line. Businesses should see marketing plans as an investment aimed at business growth, rather than a cost within the company. Planning a marketing budget allows businesses of every size to:
- Stay on track financially.
- Allocate money to the right places.
- Set realistic benchmarks and goals.
- Plan long-term and see the bigger picture of where the company is going.
How to create a marketing budget in 7 steps
A marketing budget should cover everything from how much money is being spent, to how it’s being used and how effective each campaign is. Below are seven key steps to consider while creating a marketing budget to ensure it’s as effective as possible:
1) Look at the bigger picture
Before you start planning your marketing budget, it’s important to assess where your business currently is, how much money the company has overall and how this money is allocated.
If you’re just starting out, then look at how much of the initial capital will go into marketing. If you already have a running business, then take stock of how much of the revenue is going towards marketing.
Generally speaking, start-up businesses will spend more than those that are already up and running. However, this depends on how competitive your market is and how much you think you need to stand out from the crowd.
2) Know your buyer’s journey
Otherwise known as a sales funnel, a buyer’s journey is how a customer finds and eventually purchased your product or service By understanding how customers move through this journey, you can tailor your marketing budget to where they are in the cycle. The sales funnel typically has four stages:
- Awareness: Your audience first becomes aware of a problem they have and will start looking for solutions. How are potential customers going to find out about your company?
- Consideration: Your audience has begun looking at the options available to them in the current market. How do these potential customers decide whether they will buy from you or not?
- Decision: The audience has narrowed down their focus to the select few companies that provide the best solution and/or product to suit their needs. How does a customer make the final purchase decision?
- Action: Your lead has decided to choose your company and become a customer. How does a customer actually make the purchase?
To complete this step, you must also understand your target demographic – after all, not everyone can be your target audience.
The best way to approach this is by creating buyer personas. Buyer personas are a semi-fictional representation of your ideal customer, based on market research and real data about your existing customers.
By creating buyer personas, you can get an in-depth understanding of your customer’s needs, how they make their purchasing decisions, and how you can best target them through your marketing campaigns.
3) List external costs (and beware of hidden costs)
While this step may be the most straightforward, it’s definitely one that cannot be overlooked.
By listing all of your external costs, you can paint a realistic picture of how much money your company has to work with regarding its marketing budget.
Start by creating a spreadsheet and list every external cost your company currently has, including staffing costs, marketing materials, software, marketing research, and operational costs (like web hosting, sales tax, professional fees, and content outsourcing fees).
The capital leftover is what could be used for your business’s marketing budget, but we’ll look at how to spend this money wisely in the next chapter.
It’s important to be aware of any hidden costs which can creep up on you along the way. For example, how much will it cost if you decide to outsource specific tasks such as website design or content writing? Or, how much would it cost to hire extra staff to help with marketing?
Make sure that every detail is accounted for in your budget – it might seem tedious now but it will save you a lot of time and stress further down the line.
This essential step allows businesses to set a baseline for measuring return on investment (ROI) – but more on that shortly.
4) Set business goals
Now you’ve established how much money could be spent on your marketing, it’s time to set some goals.
Having well-defined goals allows businesses to create an actionable plan and measure progress accurately. By aligning your marketing budget with your overall objectives, you can ensure that every penny spent is yielding a positive return.
These goals should be realistic and achievable within the chosen timeframe. For example, your goal could be to acquire 500 new customers in the next 6 months by increasing brand visibility through digital marketing campaigns.
This not only makes it easier to track how much money is being spent on each campaign but also how effective they are in bringing in new customers.
There are some key questions you must ask yourself about your business that may help you establish your business’s goals:
- What do you want to achieve?
- What do success and failure look like for your company’s objectives?
- How will you measure the effectiveness of your marketing efforts?
- How much revenue do you need?
- How many sales do you need to achieve your revenue goal?
- At what percentage do your leads usually convert?
- What are your business objectives for this year? What about the next three years?
5) Discover your competition
Another important step in how to set a marketing budget is researching the competition within your niche.
By understanding how your competitors are spending their money on their marketing efforts, you can better determine how much you should be spending and where your opportunities lie. This allows you to stay ahead of the curve and remain competitive in an ever-evolving market.
More often than not, you’ll find that your online competition is different to your offline competition.
Luckily, most SEO agents, like Inc Studio, will do the research and discover who your online competitors are. With this information, you can gain a better understanding of what types of content you should be creating and how much money should be spent on marketing compared to your competition.
From here, an SEO company can help set out SEO goals to ensure your marketing strategy is focused on certain KPIs.
After your competition has been identified, take a deeper look at their strategy. Are they targeting the same audience as you? Have they found a more successful way of reaching their target market with fewer resources?
6) Create your marketing plan
Now, for the part you’ve all been waiting for – it’s time to create your marketing plan.
Using the information from the steps above, you’re already well on your way to creating a tangible marketing plan aimed at achieving your business goals.
You’ll need to outline how you will reach your business goals so you can see how much each marketing activity will cost, how long it will take to achieve the desired results, and how much of your budget should be allocated to each element.
To create your marketing plan, you’ll need to outline:
- How much money your company has available to spend on achieving your goals.
- Your target market, how they want to be marketed to and how you are going to reach them.
- The channels you’re going to use for marketing (e.g., social media, email marketing, etc.).
- What type of content you’re going to produce (e.g., blogs, videos, graphics).
It’s also important that you consider how different activities work in tandem with one another. For example, paid advertising might be effective in the short term, but to maintain its effectiveness in the long term, you’ll need to consider how this works with content marketing and organic search engine optimisation.
Understanding current and future trends can be a vital part of knowing how to set a marketing budget. This information could help your business see a faster turnaround of results, all while allowing you to plan and prepare better for the future.
An integral part of any marketing plan is to remain brand consistent, as this will help build customer trust and increase brand awareness.
Once you have a plan in place, you can start assessing how much money each activity will cost and how much of your budget should be allocated to it. This is one of the most important steps in how to set a marketing budget, but more on this later on!
7) Prepare to measure ROI
The final step in how to set a marketing budget is measuring the return on investment (ROI) of your activities.
Measuring ROI helps you determine how much money your marketing efforts are bringing in, as well as how successful they’ve been overall. This can be particularly helpful when it comes to understanding how different activities such as content marketing and paid advertising work together to generate more revenue.
To measure how successful your marketing efforts have been, you’ll need to track the right metrics, such as:
- How many people are visiting your website?
- How many leads are you generating?
- How much time they’re spending on your page?
- How often do they convert into customers?
Measuring ROI can help you understand how your marketing budget is being spent and how well it’s working. It can also help you decide where to allocate funds for different activities, as well as how much money should be allocated to each activity.
But how much should be spent on a marketing budget? Read the next chapter to find out…