What’s your marketing budget?
“I don’t know.”
These three words drive fear into the hearts of courageous marketing companies. It makes our heads spin, and we need Advil and electrolytes to recover. If there is a fainting couch nearby, we might darn well use it.
Because knowing your budget is essential to making the best recommendations. It gives us parameters to work within, and tells us how to think and act.
When we hear a budget, we make mental calculations in real time and start gameplanning. If there is no defined budget, this could mean one of two things:
- “There is absolutely no money to invest into marketing.”
- “You know that one dream strategy you’ve always wanted to do but couldn’t justify all that A-list Hollywood talent on the payroll? That’s for us!”
The reality is probably somewhere in between these two scenarios. There is money to put into marketing, and there is (unfortunately) a ceiling into how far the budget will go (you’re off the hook, Clooney).
But here’s the thing – if you don’t know your budget, we don’t know it either. The best we can do is to make assumptions. We could dig deep into your financials, with your permission, but even that may not present the most accurate picture of what to spend. So how do you gauge your marketing budget, to provide an informed and confident answer?
To start, here are a few questions to consider:
“What Would A Highly Skilled Employee Cost?”
Think about what you are asking your potential marketing company to accomplish. Think about the skills and expertise it will require to work on your behalf. Now, take stock of what it would cost to hire an employee each month, with all the talents and skills you are after. What is this amount?
You can validate salary assumptions with job boards like indeed or ZipRecruiter. For equitable comparisons, look at listings for seasoned professionals, not early career postings. Got a rough idea in your head? Great – this is now your starting point for the budgeting conversation.
Keep in mind that a marketing company on a limited engagement will command a higher per-hour rate than an in-house employee. So it will likely be more cost effective to engage your marketing company on a monthly retainer, as opposed to an hourly billable structure.
Also, know that with a marketing company, your budget may stretch much further than hiring only one employee with a specific skill set. With a marketing company, you will have access to a full team of specialists with a diverse set of talents. So don’t look to undercut what you’d pay an internal team member. Instead, think of it as a redistribution of marketing funds to partner with an experienced marketing company, and all the benefits that come with it.
“What Do Our Competitors Spend On Their Marketing Budget?”
Think about your industry leaders, as well as your close competitors. How established are they, and how trusted? Is their website more effective than yours? Are they dominating search engine results? Try to see things as objectively as possible, without championing your own company for a moment.
If your competitors are ahead in one or several areas, then it’s very likely you’ll want to make marketing a top-level priority. This doesn’t mean you have to outspend them, or to carbon-copy their approaches. But it does point to devoting money towards marketing, and to investing a reasonable amount each year into building your presence, market position, and community engagement.
Do a little recon, if possible. How much do competitors spend each year on marketing? If your budget is in the same ballpark, with the right marketing team behind you, then you have a nice chance of going head to head. This is true even if you’re the underdog – marketers love a good fight. But if you’re spending a fraction of what they are, it’s likely you’ll end up with the same fraction of market share, year after year.
“What Does It Take To Become Our Customer?”
We can’t all sell umbrellas in the rain. Purchasing from your company may be a complex and nuanced process. Even if you sell a relatively simple product or service, consumers may agonize over the decision. They may want to read, learn, ask peers, and engage in any number of ways before making the commitment. And what if your product or service actually is complex and nuanced?
Education and behavior change are two of the more challenging types of marketing. Talking people out of what they know and are comfortable with, and into a new solution, takes time and patience. It can be very rewarding, but there is a lot of ramp-up that goes into educating consumers and giving them reason to trust you.
So how much do you spend? If your product or service is a new or revolutionary concept, then you’ll likely want to spend 1.5x or more the typical marketing budget to get the word out. Give your marketing team room to experiment, to prove out the concept, and show you what connects with consumers. This will give you a foundation to build from, and point the direction to next steps.
Once you’ve hit critical mass, and your product or service is virtually selling itself, then consider dialing back the marketing expenditure. But until then, you’re facing an uphill battle. Equip your team accordingly.
So, About That Marketing Budget…
All this is great, but how much should your marketing budget be?
If you go straight according to the numbers, look at spending 5-8% of your total gross revenue to maintain your current marketing position. If you are looking to grow, and take on competitors, then 10-12% of total gross revenue will be more appropriate.
Of course, this estimate varies by industry. It may not account for direct costs like ad spend, or your internal marketing team salaries. But now you have a benchmark to start with, and another way to determine how much to spend on your marketing initiatives. As goals are achieved, don’t make the same mistake that a lot of companies do and cut your spend. Instead, consider budgeting more towards marketing, to experiment, evolve, and gain a larger competitive edge.
Working With Your Budget
No matter your marketing budget, we will apply what you have to work with and use it most effectively. Healthy budgets let us cover more ground, and in many cases work faster. We are able to devote more team members, time, and higher level expertise to your projects.
Slimmer budgets give us a starting point. We may be able to cover one or two areas of your marketing, with the shared understanding that we are working within limitations. To take on your entire marketing program, or work with fewer constraints, the budget would need to be adjusted accordingly. But don’t be afraid to share your budget, and the figure you are able to devote towards marketing each month. We will always provide insights into how to apply this budget most effectively.
Marketing budgets drive business. They create excitement, momentum, and community around your company. They attract, educate, entertain, and inform your desired audience. They set you apart from the competition, and they set the trajectory for the next 5-10 years. They are an essential component of achieving your business and marketing goals.
So, with all this in mind, what’s your marketing budget?