A marketing budget defines a business' investment into marketing solutions.
It enables your marketing team to deliver on the strategy by clarifying how much your business can invest in promoting your products or services.
Setting the right marketing budget can be challenging. We speak with many businesses that are unsure how much to invest and then turn the question of budget to us. Before you begin setting a marketing budget for your organisation, there are a few steps to establish a marketing budget that’s both realistic and effective. You need to have:
- Well-defined goals that are in line with your organisation’s priorities
- Clear understanding of your current customers
- Insight into what past marketing spend has delivered
If you've never set a marketing budget before, you’ve likely already invested money into attracting customers - so understanding this figure will give you a really good starting point.
Define business priorities and marketing goals.
Linking your budget to your organisation's objectives is key part of the process. The organisations' priorities are essential - it’s what the business cares about most, and the purpose of marketing is to support the organisation in achiveing those goals. It's vital to collaborate with stakeholders to define these priorities and the subsequent goals before you set a budget.
Once you have the business goals outlined, you now need to explore how to achieve them. A recommend approach is with the SMART framework. SMART goals keep you motivated, make it easier to track progress, adjust when needed, and ensure everyone is aligned. In a marketing application, they allow trackable targets so it can be measured whether budget has been used effectively.
Your SMART goal should be:
- Specific: Everyone knows exactly what success looks like.
- Measurable: Success can be clearly tracked with defined metrics.
- Achievable: The goal is challenging but realistic.
- Relevant: It aligns with the organisation’s priorities and overall business objectives.
- Time-bound: There’s a clear deadline for achieving it.
By setting SMART goals, marketing becomes more purpose-led, accountable and results driven.
Understanding your audience.
With your SMART goals defined, you need to understand who your customers are. Marketing without clarity on key markets wastes time and resources. Here's some questions you could ask yourself:
- Do your customers tend to work in specific industries? If you have a higher proportion of customers in a certain industry, you can demonstrate you have expertise and knowledge in their specific sector.
- Where are most of your customer based? If you have a higher proportion of customers in a certain geographic location, you can focus more effort in that location. Equally you can target lesser-engaged regions to enable further outreach.
- What job roles tend to enquire with you? This helps you tailor your messaging around role-specific pain points and demonstrate how you can solve their problems.
- Which marketing channels do your audiences use most? Focusing on specific platforms popular with your audience means better utilisation of your budget.
Using previous spend and revenue as a guide.
At this point you should now have a firm understanding of where you're aiming and who you're aiming at. Now, review what you’ve spent in the past year and analyse what results it delivered. Historical spending provides a reality check and will prevent under-investing. As this will form the basis for your new budget, take your time and assess a few things:
• How many leads did you acquire from each channel?
• How much did it cost you to acquire those leads?
Understanding these figures enables you to know how much it costs to acquire a new customer. Then you can calculate how much it would cost you to meet the organisations' objectives.
With company revenue in mind, this allows you to make an informed decision regarding budget. This method ensures your marketing budget grows alongside your business: Industry standards recommend allocating 10–15% of company revenue on marketing.
Startups and newer businesses might need a higher percentage to build initial traction, while established businesses can scale spend proportionally to their growth.
How to allocate your marketing budget.
Once your marketing budget is set and your marketing strategy is written, you need to allocate it accordingly. The way you distribute your marketing resources can make a huge difference in long-term growth and success. Keep in mind tools like CRM software, e-mail marketing tools and analytics services should all account in your marketing budget, alongside seasonality.
The 70-20-10 rule is a recommended approach to allocating your spend - balancing stability with flexibility, and allowing innovation while still maximising on campaigns that deliver consistent results:
- 70% on proven campaigns or channels that deliver results. These are your non-optional, essential spends. This could include SEO to build your organic traffic or Google Ads to reach new prospects.
- 20% on emerging strategies that are currently being tested. This allows to investment into tools & campaigns that show promise in aligning with company targets.
- 10% on experimenting with new ideas that could prove beneficial.
Tracking the results.
Tracking results is key to demonstrating the value you’re bringing. Analytics are pure data, and by measuring key data points like cost-per-lead, you understand the cost of each customer. Calculating Return On Investment (ROI) shows which campaigns are generating real return, while monitoring revenue impact ensures your marketing spend is directly contributing to business growth.
Why consistent investment in marketing matters.
Marketing budgets are often first to be reviewed when leads slow. However, sticking to your plan and continuing to deliver campaigns matters the most during rough economic conditions. According to Marketing Week, 95% of B2B buyers are not actively looking for your product - meaning there is only a small viable market, and it's critical you remain focused on delivering the plan.
Staying visible and consistent at all times ensures your brand stays front-of-mind. Even if campaigns don’t generate immediate sales, consistent marketing builds awareness, educates and nurtures prospects. When your marketing stays visible you’re the first brand customers think of when they’re ready to buy. Therefore, investing in marketing should always remain a priority.
If you're planning your marketing strategy and setting marketing budgets for the financial year ahead and are unsure where to start, get in touch. We're here to help.
