What should your marketing budget be? Are you spending enough, or too much? Is your marketing spend in line with ‘the industry norm’? I’m asked questions like this all the time.
There are no easy answers. Even when you can get an idea of the ‘industry norm’, it doesn’t necessarily mean you should spend that percentage of your turnover on marketing. Your situation is unique.
But there are two things that will be true, as you try to figure out how much to spend.
1. You’ll Need To ‘Place Your Roulette Chips on Several Squares’
Experience shows that for marketing to work – for it to produce the environment in which you can sell, and gain more customers – you’ll need to ‘touch’ your prospective customers more than once, and in more than one way.
By ‘touch’, I mean that you may need to get them to see an advert, read an article, or respond to something on your website, in order for them to be persuaded to consider becoming a customer. Those are just three examples of how you might touch somebody – there are hundreds of other marketing techniques to choose from.
So your budget will have to cover doing several things, and doing them over a period of time.
You could think of it in terms of placing your chips on a roulette table. Some of your marketing efforts will work better than others, just as the payback from the roulette table can vary.
However, let’s stop the analogy before you think that there’s a chance of ‘losing everything’ if you spend on marketing: that certainly won’t be the case if you use good advice and plan your marketing well to produce solid measurable results.
2. Top-Down Budgeting Doesn’t Work, and Neither Does Bottom-Up … By Themselves
In creating your budget for the year ahead, you can look at what’s available for marketing as a percentage of your turnover. This top-down approach of putting money into the ‘marketing pot’ leads to a couple of unintended consequences.
The first is that you don’t stretch the budget for marketing to really be as big as it can be, so you end up creating underfunded, ineffective marketing. The second is that you don’t start with a clear enough idea of exactly how you’ll spend the budget, so marketing campaigns get to be designed and run later than they should be.
So bottom-up might be the way to go, do you think?
Well, if you create a list of all the campaigns you think you need to run, first of all you’ll probably find that the total spend is more than you can afford, and secondly that the spend on each marketing activity may be too small.
Go back to the roulette table analogy, and it would be like placing a chip on every square. You will win something, but it will be a small return and won’t compensate for the amount lost on the other squares. So, in marketing terms, spread your spending over too many activities, and you’ll end up underfunding many of them and ensuring that they don’t work well enough.
So The Answer Is…
There’s isn’t a simple answer. There’s no pre-defined percentage of your turnover that you should spend. There’s no single marketing activity that will produce all the results you need.
In creating your marketing budget you’ll need to find a balance between thinking about it top-down, and bottom-up.
Both are necessary, and you’ll find a point somewhere between them that’s right for your situation. And you’ll need to carefully select a variety of activities which can be adequately funded and work well together in an integrated approach to your market.
What’s your experience of setting an appropriate marketing budget? Share your thoughts in the comments.