Figuring out how to allocate a marketing budget can be a daunting task. There are so many channels—both online and off—to choose from. Taking the time to create a budget plan is a crucial first step; it will help avoid misallocating funds or stretching your budget too thin over too many channels.
Of course, if you don’t have an actual marketing budget yet, then pause. Stop what you're doing and set one. It’s worse to blindly throw money at marketing efforts than to not spend any money on marketing at all.
Not sure where to start? Check out this article. Budgets should vary by industry, and in turn, how you allocate that budget should also vary by industry. There’s no one way to allocate your marketing budget, but by following the steps below you should be able to identify what will work best for your brand.
1) Set goals
There are typically three areas that your marketing efforts can fall under: branding, lead generation, and sales. Within each of these buckets are a variety of goals that your brand may want to focus on.
Examples of goals within each bucket include:
-Email newsletter subscriptions
-White paper downloads
-Average order value
You’ll need to determine and prioritize your goals within these three buckets first in order to determine how your marketing budget should be allocated.
Once you begin formulating goals within each bucket, make sure that each goal is SMART, A.K.A specific, measurable, achievable, relevant, and timely.
Let's say you’re a higher education institution that had 20,000 applications in 2016. A SMART goal for 2017 may be to increase the total number of applications in 2017 to 25,000.
2) Identify past efforts (and how they’ve performed!)
It’s incredibly important to have a good idea of what marketing your brand has tested in the past, in addition to what marketing your brand hasn’t tested – and why.
Additionally, be sure to assess how those efforts have performed – it’s possible that a large portion of your past budgets has been put towards a channel that actually doesn’t perform well. Or maybe something that performed well ten years ago isn’t performing well anymore, in which case you should potentially pivot to a new channel.
We see this often with clients who maintain that certain channels are crucial to their business, but can’t point towards any specific metrics to support the idea. It’s always possible that any channel can work, but make sure you have a solid idea of how those efforts contribute to the goals that you’ve set.
Once you have a good idea of what marketing you’ve already done and how it has performed, you should be able to form a foundational marketing budget.
Is Google paid search pulling in the majority of your leads? Consider increasing your budget to that channel. Have you been spending a ton on social media management but not getting much engagement? Perhaps reallocating that budget to a higher performing channel could better align with your goals.
3) Research competitors
You should always have a good idea of what marketing your competitors are doing. Not only should you likely be present on channels that your competitors are actively marketing on, but it’s possible that there could be some untapped channels where you would really stand out.
Having a good understanding of the competitive marketing landscape will help prevent leaving any viable channels untouched.
Eric Yarnik, Director of Search & Social Advertising at Perfect Search Media, says, “Many tools offer insights on creative (text, banner, copy) and targeting (keywords, audience) from potential competitors that can provide an understanding of what's needed to compete on a given channel, such as a "Free Shipping" promotion on Shopping ads or a Promo code for Facebook users.”
4) Determine which channels to use and what percentage of your budget to allocate
There are a multitude of marketing channels and strategies to consider, both online and offline, and it’s important that all are considered with equal weight before making any final budget decisions.
A report from Forrester Research estimates that in 2016, the average firm was expected to allocate 30% of their marketing budget to online. This rate is expected to grow to 35% in 2019.
Additionally, search engine marketing will capture the largest share of online spend with online display (banner ads, online video, etc.) taking the second largest share. Read more about that here.
Your brand doesn’t necessarily need to be on every channel. If your budget isn’t large, spreading a small budget across many channels means you’re not allocating wisely. Plus, not all channels make sense for all brands.
What is paramount, however, when deciding what channels to pursue, is that you tie each channel back to individual goals.
Lower adds, “You should have clear expectations and goals for your budgeted campaigns. It may be very smart for you to set aside x% of your budget for Remarketing/Display campaigns to improve branding, but then don't fall into the trap of comparing the ROI of those campaigns to your lower funnel search campaigns that generate more sales or leads. In other words, if both channels are hitting the individual goals you set for them you don't want to abandon the lower performing channel for the better performing channel. If anything, you should just be adding more budget to the top performing channel.”
5) Evaluate and optimize
Once you’ve set your budget and begun your efforts, you’re not in the clear! Make sure to constantly evaluate the budget throughout the year, as you may need to reallocate budget to different channels depending on how things perform.
Sound overwhelming and never-ending? Newsflash: Good marketing is never-ending.
Another piece to the puzzle is determining whether you want to hire a team in-house to manage your marketing or use an agency. Even if you’re a CMO, oftentimes having an agency to manage all of the moving parts can help tremendously.
Check out the different models of service for digital marketing and the pros and cons of each if you need help deciding. Already decided that you’re going to move to an agency? Here’s our complete guide to vetting agencies.