How to develop a marketing budget

Step 1: Identifying your marketing goals

To set an effective marketing budget, you need to determine your short-term and long-term marketing goals as part of a bigger picture: your marketing plan (also known as a marketing strategy). Understandably, you're marketing in the first place to create either a sales funnel or direct sales that boost gross revenue, and the key to that is to get specific with your goals.

Keep in mind that marketing doesn't usually generate sales overnight. You may need to tweak your goals as you deploy your marketing campaigns.

 

Short-term goal examples:

1. Decrease website bounce rate by 5%.
2. Gain 10 quality comments on social media posts per week.
3. Boost brand awareness by generating 100 new social media channel followers each month.

Long-term goal examples:

1. Get on the first page of Google for three of your main focus keywords.
2. Create a sales funnel that generates 20% new customers consistently over the next three years.
3. Develop a marketing automation flow with email marketing that saves your team five hours each week.

Step 2: Understanding your target audience (buyer personas)

A buyer persona is a fictional representation of your target audience. You can have more than one buyer persona, but try for no more than five; after all, not everyone can be your target audience. When developing your buyer personas, get specific, and let data be your guide.

These are some ways to gather data to help you develop your buyer personas:

• Survey your current customers.
• Interview people you think may be in your target audience.
• Use Google Analytics to determine audience demographics.
• Use Facebook Insights to track user interaction with your brand.

In each buyer persona, include this information:

1. Location
2. Age
3. Marital status
4. Job title
5. Approximate income
6. Education
7. Motivations and goals
8. Sources they visit for information
9. What makes their life easier?
10. What keeps them up at night?
11. Bonus: a fictional name and photo

Step 3: Choosing your marketing channels

The marketing channels you should consider break down into four main categories. To generate the best return on the revenue you spend, market where your buyer personas go.

• Digital marketing: These channels include social media marketing, online content marketing, automated or manual email marketing, online advertising with pay-per-click ads or social media ads (paid media), and search engine optimization.

• Inbound marketing: Some inbound marketing channels overlap with digital marketing. There's SEO, blogs, videos on YouTube and Vimeo, e-books, and other types of content marketing.

• Outbound marketing: Sometimes outbound marketing is difficult to track, so combining it with inbound marketing is helpful. The most traceable form of outbound marketing is email marketing. Other types of outbound marketing include TV and radio advertisements, direct mail, press releases, trade shows, and promo products.

• Brand awareness campaigns: These channels can also overlap with the above and may include social media marketing and advertising, content marketing, public relations, and video marketing and advertising.

Now that you have a better idea of the channels you should consider as part of a marketing strategy, you can better determine your budget. There are costs associated with marketing on each of the above channels. Social media advertising tends to be the most cost-effective.

 

How much do small businesses spend on advertising and marketing?

A common marketing spend recommendation for profitable businesses making less than $5 million in sales annually is about 8% of your gross revenue, according to the U.S. Small Business Administration.

However, the exact amount of money small businesses spend on advertising and marketing ranges varies widely. To give you a better idea of what to spend, the following businesses shared their budget amounts and where those budgets go.