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The Marketing Budget – Where Do I Start?

By Debra Murphy, Vista Consulting

In most marketing courses, they teach you that the marketing budget should be a percentage of your overall gross sales, usually somewhere in the 2% to 5% range. Although this may be good to use as a guide, the marketing budget for your business is not something determined by a formula. Since every business’s marketing needs and costs vary widely, there are no simple rules for determining what you should spend on marketing your business. Here are some guidelines for developing your annual marketing budget.

What Goes into Your Budget?

The first thing you need if you don’t have one is a marketing plan. The cost of the marketing plan will pay for itself if it focuses your efforts and ensures you spend only on the programs that make sense for your business. Too many times small businesses work without a plan and needlessly spend money on “marketing” efforts that have absolutely no return on investment. One company actually admitted that they advertised on placemats. Hum… they were an IT services company. Not quite the best way to invest their precious dollars. A simple marketing plan identifies where you should spend based on an analysis of the market and your competition.

You might want to engage a marketing company to help develop your marketing plan. Their insight and experience will help create a strategy that identifies the messages and positioning that will work for your business, and a set of marketing activities that will raise visibility and generate demand. In addition, a marketing company can provide the additional resources you may need to execute the plan. Be sure to include the cost of these services in the overall marketing budget.

How do you get a quality marketing plan that fits within your budget? One option to consider would be to work with a marketing coach. You put the hours into the writing of the plan while the coach guides you and reviews your work, helping you complete the process. Instead of paying for the consultant to research and write your marketing plan, you pay them to work with you a couple of hours a week instead. Depending on how you structure the coaching effort, the cost of developing the plan could be 30-50% of the cost of a marketing plan done by the marketing consultant directly. You do need to include the cost of your time in the equation to determine if it is the best use of your time, but in many cases, working with a coach may be a great way to get a quality plan for a lot less money.

Branding

If you are a new business, you will need some brand development. Developing your company brand image is more than just getting a logo, but a quality logo done by a skilled designer is an important centerpiece for your branding efforts. Your brand image needs to be aligned with your company’s brand identity so that everything you do projects the same message to your prospects, whether it is how you answer the phone, how you project yourself, or how your Web site and sales tools appear to your prospects.

If your budget can not support the cost of having a custom logo, then check out some online companies that offer logos for a small price. The benefit to these services is that you get a quality image in all the formats needed for Web and print media. The downside is that the logo is not unique and if you are going to spend the time marketing your company to establish a brand identity, be sure that you can live with the logo you select for some time.

Sales Tools

Another area of the budget that can be controlled includes your sales tools. Sales tools are your Web site, business cards, letterhead, brochures and other materials needed to fulfill the call to action of your marketing programs. To control your costs, limit what you create, but do not cut corners on the design or quality of the tools. Cutting corners on your sales tools only make you look small and unprofessional to your prospects.

Start with business cards and a Web site. If you don’t use a lot of letterhead, have the designer create a Microsoft Word template that you can use for the occasional letter. You can print on your color printer using quality paper and the outcome will look just fine. For your business envelopes, it is more cost-effective to have them printed professionally.

Most businesses benefit from a highly professional, quality web site. Depending on your business, you can select a template based Web site or a custom designed Web site. The option you choose is based on what will appeal to your target audience. Be sure you understand the importance of your Web site to your business and the impact it can have on your revenue before you determine the budget. If your primary marketing effort for your business is Internet marketing, you really should consider putting a few more dollars into your Web site and have it developed professionally. You will also need to implement search engine optimization for your site so that the search engines can properly find you. When you get prices for Web sites from different sources, make sure you understand exactly what they are including in the price. You may think you are getting a $1000 site, but if the firm charges for additional pages over a set amount, extra for a contact form, requires you to use their hosting company (which may be a higher price than Lunarpages, which we highly recommend), and charges more for search engine optimization, you can spend a lot more than you may have budgeted.

Marketing Programs

Once you have identified your necessary sales tools, now you should identify what programs you are going to execute. All promotional activities fall within the seven vertical categories - events, direct marketing, Internet marketing, advertising, public relations, word of mouth, and strategic partnerships. Will you run breakfast seminars (events), pay-per-click advertising campaigns or other Internet marketing activities, get public relations help, join several networking organizations, advertise in the business journal, or send out some direct mail to prospects? To identify what programs are the best for your business, you might want to research your competition and see what they are doing and use that as a guide. Everything they do many not necessarily be right for you, but it is a good start to look at their activities for guidance on where you should invest your dollars.

Your most cost-effective activities include networking, Internet marketing and public relations. The activities that can be expensive are direct marketing, advertising and events, although there are some less expensive opportunities in each of these categories as well.

Keep in mind that you don’t need to do all the activities at once. Plan them out over the year so you can budget for them and measure their effectiveness. If you have too many things going on at once, you won’t be able to keep track and measure. Understanding the return on investment on a marketing activity enables you to determine whether to keep them running or stop them and try something else.

Summary

Establishing a marketing budget helps you identify the amount of money you want to spend on marketing activities over the year and to set a schedule for executing the plan. It also helps you react quickly to changes or opportunities in the market. It gives you the flexibility to move the investment from an activity that isn't performing to another that may yield a better result. Managed properly, your marketing budget is the best investment you can make in your company. If you wisely invest your marketing dollars, you can keep your costs down and get a profitable return on your investment.