Given that small businesses are not blessed with huge financial resources, it is imperative that they invest their capital in line with a strategic vision. This should be applied across all commercial disciplines, but particularly those that are capable of delivering significant ROI (such as marketing).
According to a new study, however, managerial and strategic errors cause SMEs to inadvertently waste 25% of their paid search budgets, while others simply fail to create a viable budget in the first place.
With this in mind, it is imperative that your SME creates a detailed and accurate marketing budget before spending a single penny. Here are some steps that can help you to achieve this objective:
Start With Establishing Clearly Defined Marketing and Business Goals
While establishing a budget may be pivotal to your endeavours, it is difficult to achieve this without having a clear idea of your marketing goals and how they empower you to accomplish long-term business objectives. This will enable you to determine a justifiable marketing spend, while also ensuring you have the means to invest in other areas of the business as required.
Additionally, this creates context for your clearly-defined business objectives and helps you to achieve them more effectively. If you decide that you want your business to grow by as much as 20%, for example, you will need to identify complementary marketing goals that allow you to target new customer segments across various platforms.
This will also indicate the scale of your marketing strategy, and the resources you will need to bring it to life.
Once all of your business and marketing-centric goals have been clearly outlined, you can begin to create a realistic and viable budget.
Understand the Basic Rules of Creating a Marketing Budget
As you can probably tell at this stage, the size and scale of your marketing budget will be largely influenced by your core commercial objectives.
With that being said, it is also recommended that you adhere to the fundamental rules of creating a marketing budget (along with the guidelines that are suggested for businesses of variable sizes).
For example, as a general rule it is recommended that small, start-up ventures that are less than five years old invest between 12% and 20% of their gross revenue on marketing disciplines. Interestingly, this is more than larger and more established companies are advised to spend on marketing, with companies of this type likely to invest between 6% and 12% of their gross revenue.
The reason for this is simple, as SMEs and new ventures are looking to build brand awareness and claim a viable market share. In contrast, established firms can minimise their spend as they have a fixed market share that they can target, as they leverage the fact that it is five-times more expensive to acquire new customers than retain existing ones.
Allocate Funds to the Various Elements of Your Marketing Budget
We have already touched on PPC and paid advertising earlier in the article, but this is one of many marketing elements that will make-up your overall marketing strategy. While these will be combined as part of an integrated and tactical plan that drives your marketing spend, each must be allocated an individual amount to ensure that you get the most from your capital.
There are two further considerations to keep in mind here. Firstly, you should understand the customer segments that sit at the heart of your business, as this will influence the channels that you use to reach them. Similarly, you will need to identify universally popular channels that deliver the best ROI, so that you can make an informed decision when allocating funds.
In terms of the latter, the Forrester Research Group has published a digital marketing forecast across all B2B sectors in the U.S highlighting where capital will be spent in the near-term.
Intriguingly, email marketing, social, search marketing and display will all see increased expenditure during the next years, as the average digital marketing spend exceeds £1 billion. In most instances, these tactics should therefore play a pivotal role in your marketing budget, alongside less strategic elements such as PPC and traditional advertising.
On a final note, you should also conduct competitor research to allocate your marketing spend. This not only offers an insight into best practice, but it also highlights how much you will need to spend in order to achieve specific goals.
Consider Implementation Costs
At this stage, you will have an informed budget that has been allocated to specific marketing disciplines. The final step requires you to factor in the variable costs of implementation, as you look to secure the specific skills that can execute your campaigns.
Given the increasingly diverse nature of contemporary marketing, most firms will combine the skills of their in-house team with external contractors. While the former will include permanent employees who can offer strategic insight and management skills, the latter will be hired on a temporary basis and according to the demands of each individual project. Your cost base will therefore vary at different times, but it at least contributes to a more accurate budget.
Freelancers and external specialists may also be required to handle the more technical elements of your campaigns, including outbound marketing, SEO and even content creation. Given that the average asset that ranks on the first page of Google contains an estimated 1,890 words, for example, it is little wonder that even SMEs outsource their content creation and marketing needs.
The key is to minimise these implementation costs without compromising on execution, so you will need to perform an audit on the skills that exist in your marketing team. You must then consider the best and most cost-effective way to augment these skills, while identifying the main areas where external help will be required.
The Last Word
So there you have it; four key steps towards establishing a viable marketing budget in 2017. By following these and maintaining a core understanding of your businesses needs and financial limitations, you can create a realistic budget that also enables you to realise your goals.