The Complete Guide to Developing a Marketing Budget

OVERVIEW

Marketing budgets are a business critical tool, as they help you determine what the costs will be for the various campaigns, programs and activities that the Marketing Department runs throughout the year. Unfortunately, most marketers don’t know how or where to begin creating a budget. While business courses in college may have touched on the subject, the reality is that most marketers learn how to develop a budget on the job, often through trial-and-error.

This blog will provide an overview and outline of the basic steps needed to develop a marketing budget from scratch.

MARKETING BUDGETS AND PURPOSE

Each company has its own budgeting process. Depending on the company, marketing budgets may be developed at the beginning of each new year, at the beginning of a new fiscal year, or even on an as-required basis. The process for allocating the budget dollars may also be different and may include being developed based on determining all  the associated costs, allocating a specific percentage of revenue, increasing the amount by a predetermined percentage over the previous year’s budget, or even by matching the competition’s marketing spend.

The basic reason why a Marketing budget is created is to help provide guidelines for planned expenses. But what is the purpose of the Marketing budget?

Marketing departments are involved in numerous different types of activities designed to inform and engage customers, as well as help move them through a sales funnel. Depending on the industry, these activities can range from more traditional types of marketing, such as email, print and events, to more digitally-focused activities such as blogs, videos and social media.

All of these activities, whether inbound or outbound, share one common trait – they are all very complex and have numerous moving parts.

The Marketing budget is designed to provide not only guidelines for future expenditures, but also to ensure that you have taken into consideration all the costs involved in developing and executing the various planned marketing activities throughout the year.

THE BUDGETING PROCESS

All Marketing budgets are developed following the same basic steps:

1. Know the business goals
2. Determine what marketing activities will be used to support those goals
3. Include recurring marketing activities, such as conferences, blogs, etc.
4. Research
5. Determining the costs
6. Develop the budget

Let’s briefly review each step to help you understand.

STEP 1 – KNOW THE BUSINESS GOALS

Marketing activities are critical to the success of a business. Whether focused on driving revenue, increasing the number of accounts, or acquiring new leads, the Marketing organization plays a key role in accomplishing every one.

However, in order for marketing activities to be successful, the Marketing organization needs to know what the business goals are. These goals must be communicated by the business leaders to the Marketing leadership in order for the Marketing team to determine which activity or activities will be used to support and meet the business goals.

STEP 2 – DETERMINE MARKETING ACTIVITIES

Marketing is one of the most flexible functions within a business, because, depending on the business goal, it has a broad pallet of activities from which to choose to help accomplish the goal. Once the business goals are known, the determination of which specific marketing activities will be used to support the business goals is typically made as part of the GTM strategy development process.

The various marketing actions and activities are the tactical component that enables the business goals to be met.

STEP 3 – INCLUDE RECURRING ACTIVITIES

In addition to tactical marketing activities, Marketing organizations often participate in annually recurring events, such as conferences and trade shows. There may also be other types of recurring activities that Marketing uses, such as webinars, publications, or blogs. These events and activities are included as part of the overall GTM strategy and may be used to accomplish more than one business goal.

Due to the recurring nature of these events and activities, they must be included and budgeted for in the annual Marketing budget.

STEP 4 – RESEARCH

Once you know the business goals and which type of marketing activity will be utilized, the next step in the budget development process is to do some research. This research provides you with a deeper view into your market and customers, your sales funnel and conversion rates, as well as time frames for completion of activities.

The categories below outline the type of information you need to know to develop the Marketing budget.

1)    Market information

• Who is the target audience or customer
• Who is the competition
• What is their product
• How is their product priced and positioned
• How is your product priced and positioned relative to the competition
• What is your competitive advantage
• Which marketing channels do your customers use or are active on
• Which events are important to your customers

2)    Sales funnel information

• How many leads are generated per month via the various lead generation activities
• What are the customer touch points throughout the funnel
• What type of information is needed at each stage of the funnel
• In what format is that information
• How much lead nurturing is required
• What is the conversion rate to SQLs (sales qualified leads)
• What is the sales close rate

3)    Deadlines and time frames for

• Business goals
• Conferences, events, trade shows
• Recurring activities
• Tactical marketing activities

STEP 5 – DETERMINING THE COSTS

Once you’ve completed the research, you need to determine the costs that will need to be factored into the budget. This includes the costs of the various activities and events, recurring costs, vendor costs, as well as related business costs. This information provides the foundation for developing the actual budget.

Depending on your company’s accounting practices, items such as head count, travel and expenses may also need to be included in the budget, so be certain that you understand your corporate accounting requirements.

Costs may include:

• What is your business’ average cost per new lead
• What is the average total customer acquisition cost
• What is the cost of the marketing activities being considered
• What are the associated labor costs
• What are the associated material costs
• What are the associated vendor costs
• What are the other costs (travel, lodging, food, etc.)

STEP 6 – DEVELOP THE BUDGET

Once you have completed the necessary research and gathered the required financial information, it’s time to develop the budget.

The easiest way to calculate the total annual budget request is to add all of the various costs together to determine the overall budget number. This reflects the amount of money that Marketing needs to have budgeted on an annual basis to accomplish all of the business goal(s) and recurring events as outlined in the GTM strategy. If you require a more detailed breakout, use the cost estimates you have gathered to develop budgets for specific events or activities.

In addition to the total cost, you may want to include an overage factor in the budget. Although this is often not considered part of the “formal” budgeting process, it does reflect reality. Note that if you do include this, you need to identify it as such; do not try to hide it in other categories. This overage factor is used to account for unplanned expenses that may develop throughout the year. Depending on your industry and the planned GTM activities, this amount may be from just a few percent on up into double digits.

SUMMARY

The Marketing budget is intended to be used as a tool to provide a general guideline for the expenses related to marketing activities throughout the year. That’s why when you develop a budget, it is important to include as many components and factors as possible to accurately reflect the cost.

Bear in mind that in many companies though, Marketing expenditures are not considered an investment, but instead are viewed as an expense. This means that the total requested budget amount may or may not be approved, may be reduced or modified, or may even be given to another department.

However, by following these guidelines, developing a Marketing budget will be much easier.

© 2020 – Richard Hatheway, Catalyst Strategic Marketing

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