To set a marketing budget, you will need to look at past records, do thorough market research and analyze your team’s needs. Let’s look at these steps in detail.
Take a look at past results
The phrase “Yesterday’s lessons, tomorrow’s innovations” holds true when setting marketing budgets during a recession. It’s all about knowing what’s working, and focusing in on activities and core channels that are delivering.
See where your dollars had the most impact in the previous year—the campaigns that brought the biggest return on ad spend (ROAS), conversion rates or lead sources. For example, if you got X number of leads from influencer marketing in the previous year, you can propose an X+10% increase in budget for the same activity this year.
Create internal benchmarks by platform and across all media channels to identify areas of investment that are not worth continuing. If you didn’t have metrics in place last year, now is the perfect time to implement them based on your company’s overall goals.
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Do your research
You need to be aware of the market conditions to allocate the right marketing budget. Research how the market has changed since last year: Do you have the same competitors? What is your current brand perception? How has AI impacted the market?
Look for industry benchmarks to gain insights into what your competitors are spending on marketing. This will give you an idea of what your marketing budget should be.
Also connect with industry peers to learn how they’re managing their budget and keep close communication with your team about the results they’re seeing from marketing spend.
Such insights will help you identify new areas in marketing where you can focus your budget or refine existing ones.
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Understand your team needs
When creating your marketing budget, carefully evaluate team needs, skills and the required resources necessary to achieve your marketing goals. This is important considering skill gap is a major issue in many marketing teams. A Gartner survey reveals a majority of CMOs find their teams lack the capabilities required to deliver their marketing strategy.
Compare your team’s existing skills with the skills required to execute your marketing strategies effectively. You can either address these skill gaps by providing additional training and resources for your team or hire additional team members, freelancers, consultants or agencies to fulfill specific roles—both of which will affect your budget.
Another important factor to consider when setting budgets is your team’s bandwidth. For example, your SEO team may aim to increase domain authority through backlinks. However, they may not have the time to reach out to the many sites required to achieve this goal. So, you must set aside a budget to outsource this task to a backlinks expert.
Get the bigger picture
You now need to see the bigger picture and set priorities.
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Company goals are the anchoring points of your marketing budget. Consider both long-term and immediate goals—the former to get leads quickly and the latter as a growth strategy for the future.
The market research you’ve performed will also help you develop new goals and navigate old ones. There might be significant shifts in the market that push your strategy in a certain direction or internal changes that will influence your brand marketing strategy.
Next, you’ll need to create an estimate of the costs associated with different marketing activities. Take into consideration the cost of tools, resources, employees and contractors.