Do you worry about whether you are getting good return on your marketing spend? Maybe you feel like the marketing team try things but they don’t seem to have been effective?
Yes? Well don’t worry because you are certainly not alone.
Having a marketing budget definitely helps to keep everyone focused but let’s explore that…
Proper marketing plan
Whilst most CEOs have confidence in their business plan, and a strong direction of travel, I find it astonishing just how many businesses don’t have a decent marketing plan – aligned with the business goals. It doesn’t need to be War and Peace though.
You need a plan so you know what to expect – to give you confidence about how your marketing function is going to support the business – whether that’s growth, acquisition, moving into new markets or something else.
And with that plan there needs to be a budget…
Setting a budget
I’m often asked how much a company should allocate as a marketing budget. The reality is that it depends on a number of factors, but as a general rule of thumb I would say a minimum of 5% of revenue.
So what are those factors?
- Your growth plans – if you have aggressive growth goals, then you are going to need a marketing budget to match. Plan for at least 10%. Just so you know… Salesforce spend up to 46% on marketing and they have grown every year, year on year – impressive growth too. But don’t panic, I am not suggesting you need that level of investment.
- Your sector – some sectors spend more on marketing, typically technology, FMCG, communications and media – but you need to know what’s normal in your sector. If you are in a highly competitive environment then you may need to keep up with your competitors – granted if you have a very creative marketing team you can employ some guerilla tactics on a lower budget, but that is a tough gig.
- New to the market – if you are a start up, moving into a new sector or branching into new geographic area then you may need to find some more money to help the company get known in a new environment.
How should the budget be allocated?
While you will want to leave that to your marketing team, here are some things for you to look out for:
- Customer feedback – keeping abreast of what your customers think needs to be in the plan and with relevant budget allocated every year. We will talk more about how to do this another time, but certainly you will want to consider some external collection of customer opinions.
- Data – ensuring the marketing data is fresh, current and meaningful is essential. And that’s to the whole business, not just the marketing team. In reality, that’s likely to look like a CRM type system, and would be shared between sales and marketing. Who takes ownership of it is a whole minefield in itself, but certainly something to consider.
- Website – you don’t need a new website every year, but the chances are that enhancements are likely to be needed most years. Sometimes that’s quite a big project, and some years it will be relatively low key. This includes maintaining relevant plugins and software that sits in the background and ensures the marketing team have a good view of what online activity looks like for the business.
- Email – despite what you might have read, email still remains a very cost effective way to market, to both existing customers and people considering buying from you.
- Social – it’s unlikely your business won’t use any social media, but whatever channels have been chosen, consistency and regularity are the watch words. Do one well rather than six half heartedly.
- Off line – despite what you might have been encouraged to believe, you should consider marketing activities in the “real world” too. That might be trade exhibitions, running events, attending networking, joining trade bodies, sending direct mail campaigns and so on. That’s up to your marketing team to plan and recommend to you, but you certainly should have something to supplement digital activity.
This isn’t an exhaustive list – there are plenty of other activities that could, and potentially, dependent on relevance, should be added to this list, but certainly the above activities should be included.
Once the marketing team have a marketing budget they know they only have a finite amount of money to work with. It is up to them to spend their budget in line with what has been signed off, and the plan they have shared with the board. And they need to report against that. This does help to reduce the temptation to spend budget on “deals” that might be offered to the team.
And this gives you the right information and resources to hold your marketing team to account.
So, do you have a marketing budget for your business?