Deciding how much to spend on marketing is always a tricky job.
On the one hand, marketing is one of the most important tools that can increase sales and take your business to the next level.
Yet, the impact of marketing is rather indirect. If you can’t put a finger on what exactly worked to achieve a particular business goal, it makes it difficult to gauge the efficacy of your marketing efforts.
Was that months-long aggressive email campaign worth it? Would implementing a chatbot be better than an individual outreach program? Does your current marketing paradigm justify its expense?
To answer these questions, you need to devise a sound marketing strategy and plan your expenses accordingly. And to help you along, here are four smart strategies for creating the perfect marketing budget.
1) Consider marketing an investment
One common mistake most make when drawing up a marketing budget is to treat it as a recurring expense.
Do not do this.
By viewing marketing as a cost of running a business, you free it from the expectations of bringing a good return. This, in turn, breeds complacency in your marketing department.
Instead of writing off your marketing expenses as routine expenditure, treat each and every penny spent on marketing as an investment into your business. It’s an investment like any other that needs to justify itself by improving your company’s revenue and pushing its growth.
And this is where your budget comes in.
A strict budgeting policy is necessary to keep track of any investment, and marketing is no exception.
But you cannot just approach this as a personal budgeting exercise. Creating a performing budget for your business is a different beast, taking into consideration a multitude of factors like Cost Projections, the 50/30/20 Rule, and others.
2) Understand your sales funnel
When you consider marketing as an investment, it is no longer enough to throw money on every marketing channel and hope something sticks.
Instead, you should understand where your paying customers come from, and focus your marketing efforts on that channel.
A sales funnel is simply the mode of marketing that attracts the most sales. Your sales funnel can have various forms: it can be Pay-Per-Click, email campaigns, or maybe even traditional advertising.
The key is to determine a funnel that gives the best return for your investment and has the highest conversion ratio.
This sales funnel will be your primary marketing target moving forward, and depending on your marketing goals – something we will address in more detail in the next section – might even be your sole marketing target.
It doesn’t have to be a single funnel, either.
Often, you will find that different classes of products and services get better responses through different marketing methods. In such scenarios, you cannot ascribe a single dominant sales funnel, but multiple approaches which have to be taken together to be effective.
Small business owners, who don’t have the commodity of dedicated sales teams, can look for help from professionals in a marketing agency to determine customer touchpoints and identify sales opportunities.
3) Determine your marketing goals
Now that you know where to invest your money for the maximum returns, you need to determine what you want to achieve from your marketing efforts.
Do you intend to expand to a new market? Or do you want to increase sales to your existing user base?
Depending on how you answer these questions, your marketing strategy will be radically different.
Claiming new markets requires far more spending and effort than merely redoubling on your paying customers, and requires your plans and budgets to keep up. You need to explore new channels of media, reach out to communities, and capture the attention of a new breed of users.
However, if your goal is to upsell to your existing customers, you can do with a lower budget, and use excess funds in other areas.
The sales funnel you identified earlier can be a massive help, as it tells you exactly where you need to invest for the most result, allowing you to be efficient with your money.
Not that you have to pick one and stick with it; a hybrid approach can work well if done right. Just remember, you need to figure out your goals before you can craft a budget that can help you reach them.
4) Keep an eye on the competition
Marketing is a very treacherous field. What works today might be a complete trainwreck tomorrow. In a world where new trends and vastly differing business advice emerge every day, it pays to pay attention to what the competition is doing.
Sometimes, despite doing everything right, you may find something a competitor is simply doing better. Incorporating this winning tactic into your own marketing strategy can significantly boost your mileage.
That does not mean that you should just cobble together good marketing ploys into a conflicting mixture of ideas.
You still need a dedicated marketing team to sort through those ideas and pick elements that could work well with your existing brand image or adopt strategies that complement your established style.
Even when a rival is doing something wrong, there are lessons to learn from their failure as well. Understanding why a particular strategy didn’t work is just as valuable as learning why something did, as it helps you avoid the same pitfalls.
While marketing is all about taking risks and trying out new things, you can also be smart about it.
A good budget goes a long way in minimizing risks and yield the maximum dividend. But a budget is not just a ledger of projected costs plotted out on paper; it is strategy given form, outlined with clear goals and underlining the probable risks.
A well-designed budget can elevate your marketing efforts from passable to incredible, by improving performance and making every penny count.
A smart budget also ensures that your marketing efforts keep pace with your competition. Make sure to learn from the trends and stay ahead of the curve.
Because as they say, preparation is half of the battle.
This guest blog post was written by Heather Redding. We hope you’ve found it interesting and informative. Sound off in the comment section!
Heather Redding is a part-time assistant manager, solopreneur and writer based in Aurora, Illinois. She is also an avid reader and a tech enthusiast. When Heather is not working or writing, she enjoys her Kindle library and a hot coffee. Reach out to her on Twitter.