Marketing Advice
How do I set a marketing budget?
Right now, business times are tough for many people. So in their completely mad mindset they immediately jump to cost cutting, and the first line on the agenda is the marketing budget.
N
ow fundamentally this is bonkers, because if you want sales to help your business survive and thrive, you need to be marketing to customers and potential customers.
But the reason you don’t like what I’ve just said and it disagrees with the cut you’ve just made to your marketing budget is that you, along with most people in business, look at marketing and marketing budget in completely the wrong way.
So; here’s how most people think about marketing budgets.
Route 1:
What’s our turnover?, Pick a percentage of spend (say 3-10% depending on how aggressive your growth plans are), that’s your budget for the year, make it work.
Route 2: • What do we want to do? • What does that cost? • Right, can we afford to do that? Let’s go with whatever we can afford and ditch what we can’t? Both of these approaches are fundamentally backward in their thinking. So first of all, let’s set the mindset right.
• Marketing is a business investment. • Business investments need results. • Results are measurable outcomes.
Question 1: What are the measurable outcomes we need marketing to create to help us achieve our strategic objectives as a business?
Whether that’s sales in pounds and pence, a number of new customers, a number of newsletter subscribers etc. A measurable outcome is anything you can measure, and ideally, anything you can place a value on in pounds.
Question 2: Marketing should be producing a return on investment; so, if marketing is going to produce ‘x’ measurable outcome, which is worth ‘x’ to the business, we should be spending less than that measurable outcome on marketing!
Ideally we are looking for marketing to produce a multiple. So we should start by targeting 2x. i.e. if we spend £1,000 on marketing we should get £2,000 back. It is important to also set time frames on this. For example, a website which costs £10,000 is unlikely to produce a marketing return of £20,000 next month. But if a £10,000 website has a three year life span, will it produce £20,000 over that time?
Whereas a PPC campaign should start delivering in 3 months, and therefore, on a monthly basis are we getting double the value of our investment per month? Our marketing multiple should ideally start increasing - if we have achieved 2x, could we target 2.5x, or 3x our marketing investment to a measurable result?
Question 3: Now we know two things. The multiple we are targeting (say 2x marketing spend) and we also know our target measurable outcomes, what should our marketing budget be? You can look at this in a couple of different ways to sense-check your budget and make sure we’re happy.
Firstly, you can look at this from a specific campaign perspective. i.e. If we want to generate £10k in sales this quarter from a product, and we make a margin of 50%, that means we have £5,000 of profit, and therefore we could invest £2,500 in marketing for a 2x conversion. Then we can ask, ‘are we happy with that?’
The other way you can look at this is globally across the business. Marketing is being tasked with generating £200,000 of revenue for the business. If we are doing 2x, that means over the year I have £100,000 to play with (including salaries btw!).
That then gives you a budget for the year, you look at each of your campaigns you want to run, what’s the target for each?, what budget do you need to achieve that budget?, then go… While some people might not enjoy maths, the key thing is the mindset. If you move from ‘marketing costs x’, to ‘I’m trying to achieve the following result, marketing should be ROI generating, and therefore what’s the acceptable budget for this campaign to achieve that result’ - you’ll see and evaluate marketing in a different way.
• Javan Bramhall is owner of Digital Glue marketing agency
| 22 | September 2023
www.printwearandpromotion.co.uk
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