How to Effectively Plan and Optimize Your Marketing Budget?

Milan Kundera rightly said, “Business has only two functions – Marketing and Innovation.” Big or small, businesses need to invest in marketing for building brand awareness and encourage people to use their products. However, there are chances that you might end up spending a lot of money at the wrong place without a marketing budget plan. A marketing plan will help you to align your efforts to your business goals within a stipulated budget and time frame.

There are numerous marketing channels in the market but you need to focus on the ones favorable for your business. Once you work on a marketing plan, you’ll know how much you need to invest where, for the best results.

First, let’s understand what a marketing budget plan is.

A marketing budget is the amount of funds a business sets aside for expenditure related to the promotions of its products. A marketing budget can be both short and long term depending upon the business goals.

A marketing budget plan is comprehensive and includes all the promotional activities that you are planning to undertake on a short and long term basis. It includes all the areas of marketing like hiring costs, paid ads, events, website maintenance expenses, etc.

The main points that you must consider while planning and optimizing your marketing budget are given below.

Plan and Optimize Your Marketing Budget Effectively

1. Define Your Marketing Goals

For defining your marketing goals, it is crucial to determine your business goals first. You need to analyze your sales funnel and get specific with the goals. You need to critically examine the pain points or at which stage you’re losing the most customers. Marketing will help you to bridge the gap and retain as many customers as possible and even move them further down the sales funnel.

You need to narrow down the short-term and long term goals of your business. For example:

Short Term goals:

o   Increase website visits by 5% within a month

o   Gain 100 new followers each month for boosting brand awareness

o   Send 2 newsletters each month for retaining customers and enhancing brand recall

Long Term Goals

o   Develop an e-mail marketing automation flow that will help to save five labor hours each week

o   Build a sales funnel that increases leads by 10% consistently over the next two years
 

2. Know Your Buyers

You should know who your buyers are and how their journey looks when they interact with your brand. It will help you to understand where and how your audience reacts to the company’s marketing budget plan. Exploring these metrics will give you an idea about where you should focus more.

For example, there is a cosmetic brand that is launching a pocket-friendly range of make-up and wants to attract college-goers. They need to analyze where this generation is spending most of its time, where they discover products, what they do before making a purchase, how much they spend online and offline, etc. These questions will help them to identify the most effective marketing channels for their prospective buyers. For attracting Millennials and Gen Z, the most promising way is to run paid ads on social media as they spend most of their time on social media platforms.

This is an example of the first stage of Awareness; you need to analyze your audience’s behavior for every stage of the marketing funnel.

3. Choose the Marketing Channels

Once you are aware of your buyers and marketing goals, it is time to choose the marketing channels which will deliver the most attractive results for your business. Not every channel will work for your brand. A few examples of marketing channels are

o   Inbound marketing

o   Outbound marketing

o   Digital marketing

o   Events, etc.

You may also want to consider which channels your competitors are present.

4. Analyze the Cost

Analyzing the cost of marketing efforts is an important step as it will help you to decide how much budget you should allocate for marketing. Consider the costs of:

o   Agencies and freelancers

o   Paid campaigns

o   Resources involved

o   Events

o   Tools and software

o   Research

These are some examples of the costs that you will incur for the marketing of your business.

5. Allocate the Marketing Budget

It is an important step for a marketing budget plan. With all the above information in hand, you’ll be in a better position to decide how much budget your business should allocate for marketing activities. There are various ways you can do that:

o   Competition Matching – Spending around the same amount as your competitor.

o   Revenue Based – Setting aside a percentage of the company’s revenue for marketing. B2C has a higher percentage as compared to B2B. Like businesses in communication media tend to spend around 10% of their revenue on their marketing, mining and construction spends 3% of their revenue and so on.

o   Goal-driven – Management and marketing teams determine goals and set a budget to achieve those.

o   Top-down – There is no set budget. Management asks the marketing team to spend within a figure presented by them.

One way to calculate total spending is by estimating the cost per lead and multiplying it with goal leads. For example, you set a target of 100 leads and estimate cost per lead based on past campaigns or industry standards. Say it is $50 per lead. Then the estimated spend will be 100 x $50 = $5000.

Mallika Kazim, Senior Business Advisor suggests, “70% should go to activities with proven results for your business, 20% to efforts that could be effective but aren’t as certain, and 10% to new and untested activities.”

6. Track the ROI and Optimize

Tracking the ROI is crucial for an effective marketing budget plan. It will help you to analyze if your efforts are going in the right direction and optimize the campaigns for future plans. You can consider campaign tracking or lead tracking. Take it slow and adjust one variable at a time to see its effects. Just by changing a Facebook ad creative can make a huge difference.

You would have to calculate the estimated revenue by multiplying leads, conversions rate (5% as an example here) and sale price ($2,000 as an example). Lead-to-sale price can be projected by considering industry averages.

Referring to the example mentioned earlier in the article, the calculation can look something like this:

[100 (leads) X 5% (conversion rate)] X $2,000 (sale price) = $10,000 (estimated revenue)

And then for calculating projected ROI, you can use the following formula:

[$10,000 (revenue) - $5000 (marketing cost)/ $5000 (marketing cost) = 100% (projected ROI)

The process of effectively planning and optimizing your marketing budget plan can be overwhelming. It is certainly not a job of a single resource. Businesses serious about their marketing budgets often outsource the whole process to an agency. Jupyter Analytica has subject matter experts in numerous domains of marketing. If you feel that your marketing efforts are not coming to fruition, get in touch with us and we can optimize your marketing budget for maximizing profits.