How to Build a Marketing Budget. 3 Steps to Help You Plan for 2021.
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Developing your marketing budget
Defining your marketing budget can be a challenging process in a normal year. Many organizations estimate their marketing budget based on the previous year’s budget and mark it up by a percentage. 2020 has brought non-stop changes which may make the budgeting process more complex than ever before. The business environment has changed, as a PSP or supplier, your direction may have changed and how you approach the market and the tools you use has definitely changed.
Below are three steps to define your 2021 marketing budget
1) Revenue based planning
There are several considerations that a company should account for when determining their budget. The size of the business, your growth expectation, new product launches and the markets you’re currently serving and new markets you’re entering. All these will impact your budget. Consider these two guidelines, since there are no hard and fast rules for budgeting:
12 - 20% (of net sales) for new entities looking to build awareness
6% - 12% (of net sales) for established organizations
Again, these are guidelines, your requirements will vary based on specific organization goals.
2) Three areas of revenue generation - Customer Retention, Growth, Acquisition
From a marketing perspective you will need to deploy tactics and strategies in each of these areas to generate revenue. Depending on your business focus for growth, there are up to three areas that require resources and budget:
Customer Retention, keeping those customers that you worked so hard to acquire. Plan for loyalty programs. Loyalty leaders in their industry grow revenues roughly 2.5x as fast as other companies.
Customer Growth, expanding the product and services your customers buy. Cross sell offerings via multichannel programs are effective.
Customer Acquisition, growing market share by expanding your customer base. This is the most resource intensive area of the budget. It costs to build awareness and it’s a longer process.
3) The spend
Costs include, but aren’t limited to, the following and should be included in the marketing budget:
Multichannel outreach programs
Website updates
Content creation – case studies, videos, etc.
Social media
Sample kits
Events – on-site and web-based
Promotions
CRM services
Loyalty programs
Your budget has a limit. You will likely need to consider and estimate costs for internal resources for their time and external resources with fees for service. Use it wisely.
As you track your progress and evaluate program effectiveness throughout the year continually revisit your budget. Track marketing spend on a monthly or quarterly basis to evaluate programs and revise strategies.
Just like your marketing strategy and marketing plan, communicate with your team. Inform other departments of your planned programs. Are you looking at a new CRM? Engage with sales and customer service since a CRM will impact their line of business.
2021 is sure to be a year of highly creative programs with associated budgets to attract prospect and customer attention.
Not sure how to begin your marketing budget? Is now the time? Complete the contact form or call me direct 646.320.8854 for more information.
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