Setting a Marketing Budget. Is More Better?

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Pop Quiz:  How do you determine the size of your marketing budget?

  1. The sky’s the limit. Make it as big as possible.

  2. Allocate any money the business doesn’t need for something “more important.”

  3. Don’t worry about a budget. Just make sure you’ve got money set aside in other expenses.

  4. What ‘s a marketing budget?

  5. Just use the amount you spent last year.

None of the above answers are right (not even #5).

Marketing budgets need to be set each year according to projected revenue. A company focused on growth determines overall business strategy at the corporate level, e.g. double revenue over the next year by expanding across the country. Then marketing steps up to the plate to figure out a marketing strategy, a plan, and the resources required to make it happen; e.g. increase market exposure, acquire new leads, drive sales.

The budget is calculated this way:

  • If you are a service company, take 3-6% of your target revenue for the next fiscal year.

  •  If you are a product company, aim for 7-10% of your target revenue for the next fiscal year.

    HINT: target revenue - if you want to grow - you spend more.

But doesn’t marketing always want more?

Marketing can get a reputation for being expensive, even extravagant. Consider, for example, the 2011 branding blitz by Angry Birds, which flew 8 video-playing fans from Helsinki to Singapore in a Finnair airplane bearing the name and logo of Angry Birds. Kudos to Angry Birds, but bigger isn’t necessarily better. The key is selecting the right combination of resources applied in the right way. A micro business may only require a couple of thousand dollars to make the next year’s revenue target.

Partners in business growth

Whatever your size, strategies for growth require resources and grit. Otherwise, inspiring goals like “leverage existing partnerships” and “penetrate digital sales channels” remain on a flip chart. Even worse, at year end when sales are down, corporate blames marketing for “getting it wrong” and marketing blames corporate for holding back on time and money.

Setting a budget based on revenue projections helps corporate (particularly finance) view marketing as a realistic investment in growth, not an “expense”. You’re in this together, from setting up the initial objectives to celebrating success at the end of the year. Marketing becomes a partner, not department that eats dollars for breakfast.

As a full-service B2B Marketing Agency in Toronto, we have a team that enable businesses to grow. Every marketing dollar is focused on attaining the largest return for each of our clients by ensuring that we match the right customer journey to your business.