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A small business marketing budget is an investment of both time and money for entrepreneurs and small business owners that, when done correctly, can exponentially grow brand awareness and new customers. As with any marketing investment, there’s a measure of risk. So how do you know if you’re making the best possible use of your marketing spend?
1. Define Your Marketing Budget
The first thing to do is define your goals and priorities. The point of developing a budget is to spend wisely and keep track of your marketing dollars. Remember, a good marketing budget needs to fit within your overall business budget and should never be so high that it impacts your business’s ability to function.
Identify and prioritize both short-term and long-term business and marketing goals. If you already have marketing campaigns in the pipeline, be specific when budgeting for the goals of those campaigns. For instance, if a particular digital marketing campaign’s goal is to generate search engine leads, it will have different spending requirements than a email marketing campaign advertising a limited-time special offer.
Be sure your marketing activities account for the entire buyer’s journey. Think about what goes on behind the scenes of a successful marketing campaign. Market research will cost money, as will hiring a contractor to set up and evaluate your different channels (e.g., website, social media). If you fail to take these factors into consideration during the planning process, you might spend more than you should in the long run.
2. Identify Your Target Audience
Knowing your target market is critical to your marketing budget and goes hand in hand with defining your priorities. It will help you gauge how many potential customers you need to reach and the best frequency to grow your customer base. By segmenting your target customers, you will be able to glean which types of marketing campaigns are the most effective for which audience groups.
Direct mail coupons and pay-per-click (PPC) ads work well for B2C companies (like restaurants) that want to attract new customers who live within a specific radius of their location or in the same ZIP code. If you need to target a specific audience, postcards and social media ads enable you to get your message out to your ideal audience with pinpoint accuracy. For instance, you can target your marketing campaigns by age, income, purchase behaviors, home ownership, families with children and more. You can also retarget all devices in the homes you mail ads to with programmatic display ads.
3. Choose Your Marketing Channels
In one regard, this is an aspect of identifying your target audience. After all, you don’t want to waste marketing dollars on a channel your customers aren’t using. However, different channels will have different marketing costs and not all channels will need to be used in the same way for every campaign. For example, a portion of your website spend might go toward search engine optimization (SEO) or content marketing, which your business should continue to do no matter what campaign is running.
Researching the marketing channels you plan on using can also help you avoid surprise costs and overreaching your capabilities. Include or exclude channels based on your market research / competitor benchmarks and plan to A/B test instead of blindly advertising on a channel and hoping it brings success. You should investigate all marketing methods—direct mail, online advertising, mobile app ads, TV, radio, etc.— rather than making assumptions and choosing at random.
4. Review Your Marketing Plan
Advertising success requires a long-term view, so established companies know to plan your marketing strategy for the coming year, not month. While there will always be unexpected events you’ll want to capitalize on, identifying key holidays, seasons or public relations events that affect your business and advertising costs is important.
Take TV advertising during the pandemic. Competing for time slots was exacerbated by more people at home. Several events saw an increase in ad spend, including primetime sporting events and network programming. Political coverage also drove up prices (it always does), while events like the debates drew viewers away from their normal viewing habits. Sometimes buying in advance can lower your advertising costs, but this isn’t possible if you don’t plan / set aside for new business opportunities.
5. Do Some Market Research
Go out of your way to explore what’s set to happen over the next year and how it impacts the marketing channels you plan on using. Co-op marketing programs are a great place to start if your business sells goods. In a nutshell, co-op advertising is when a manufacturer will pay a portion of a business’s advertising costs if they promote a certain product/product line. In some cases, they will provide images, graphics or templates to use in the ad. Keep in mind that not all co-op opportunities last the entire year and the manufacturer may have some restrictions on which marketing channels can be used.
Rule of thumb: Pinpoint marketing efforts you can afford to take advantage of. If you jump on something last minute, it could be out of your budget or much more expensive than if you planned for it. Or, you could miss the boat entirely.
6. Advertise Based on Metrics
All advertising should consider potential return on investment (ROI). That means taking a big-picture look at your marketing goals. What are your advertising opportunities? Which channels do you want to use to reach different target audiences? What are the marketing costs associated with each? Compare your intentions with past campaigns and the ROI those offered so you can select the best options.
There’s no one-size-fits-all path, nor is there a guarantee of marketing success. You also can’t afford to do everything. The data you’ll collect throughout each step will help you realize which marketing strategies are most likely to be most successful. This free marketing ROI calculator can help you easily determine return on investment.
7. Assess Your Marketing Spend
Many small businesses set their marketing budget according to what is left over after expenses are paid. Sometimes, on a month basis. While creating a budget can be time consuming (and, at times, frustrating), it’s crucial for staying on track throughout the year. So how much should you allocate toward marketing? What’s a good average marketing budget?
As a general rule, the US Small Business Administration suggests spending 7%-8% of gross revenue on marketing (for small businesses and startups). The marketing dollars you spend are often limited by other budgetary concerns. Look at how much your business has already been spending on marketing and compare that number to past results to help set total marketing spend.
8. Set a Monthly Advertising Budget
Align your total advertising spend with your marketing calendar. The amount you budget to spend monthly might fluctuate based on your needs at the time, or the needs of your customer base. Events, sales, seasonality and holidays should all be considered in creating your monthly advertising budgets.
These steps are best practices to help you create a small business marketing budget that sets your business up for success. By aligning your marketing strategy and goals with your bottom line, you’ll execute each marketing campaign with confidence.
Start Building Your Small Business Marketing Budget Today
This is simply the starting point for integrating a solid marketing budget into your business plan. Continue expanding your knowledge base and find more tools to refine the way you spend your budget across the sales funnel. Your local Valpak marketing consultant is on hand to help you with your marketing plan and budget, so give them a call today.
