Setting a marketing budget - Y&NY Growth Hub

Two colleagues share a joke in an office — Setting a marketing budget

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Allocating your marketing budget involves making informed decisions about how much to spend, and where to invest your money, to achieve your marketing objectives. On this page, we’ll provide you with the basics of how to set a marketing budget and effectively split it between different channels.

Define your objectives

Before allocating any budget, it’s essential to have a clear understanding of your marketing objectives. These objectives should be specific, measurable, achievable, relevant, and time-bound (SMART). Examples of marketing objectives include increasing brand awareness, generating leads, boosting sales, or improving customer retention. Your objectives will guide your budget allocation.

What’s your financial situation?

Evaluate your business’s financial health and determine how much you can realistically allocate to marketing. Your marketing budget should be aligned with your overall financial strategy, considering factors such as revenue, profit margins, and cash flow.

One way of setting a marketing budget is to allocate a percentage of your projected revenue. A typical range for marketing budgets can vary widely, from 5% to 20% of annual revenue, depending on the industry, business size, and what stage you’re at in your development or growth. The percentage you choose should reflect your industry’s competitive landscape and your specific marketing needs.

What’s a good benchmark for your industry?

Research industry benchmarks to learn what other businesses in your sector are spending on marketing. This can help you determine if your budget allocation aligns with companies of a similar size and situation, and whether you need to adjust your budget to remain competitive.

Split your budget

Once you have your overall marketing budget figure, the next step is to determine how to split it effectively between different marketing channels. Here are some considerations for allocating your budget to various channels:

Save money for your high performers: Review historical data and identify which marketing channels have delivered the best return on investment (ROI) for your business. Allocate a significant portion of your budget to these proven channels to maximise returns.
Remember your target audience: Understand where your target audience spends their time. For example, if your audience primarily uses social media, allocate a substantial portion of your budget to social media advertising.
Balance between online and offline: Depending on your business, you may need to allocate funds to both online and offline channels.
Test test test!: Set aside a portion of your budget for experimentation and testing. New channels and strategies may emerge, and you should have flexibility to explore and assess their effectiveness. You should also be testing different copy and imagery for each campaign before committing, to help you refine what’s going to work.
Changing seasons: Some businesses experience seasonal fluctuations in demand. Adjust your budget allocation accordingly, allocating more during peak seasons and less during slow periods.
Analyse and adjust: Monitor the performance of each channel regularly. Use data and analytics, including automated reporting, to make informed decisions about reallocating your budget as needed to optimise your marketing efforts.

Setting a marketing budget is a strategic process that requires careful consideration of your business objectives, financial situation, and industry benchmarks. The steps outlined in this guide will help you create a budget that aligns with your goals and effectively allocate resources to various marketing channels. And remember to be flexible! Be prepared to adjust your budget allocation as market conditions and the performance of different channels evolve over time.