What Kind of Marketing Budget Is Realistic?

The bigger your marketing budget, the more freely you can spend on PPC (Pay Per Click) ads, content creation, ad space, and other aspects of marketing. However, no company has an unlimited marketing budget, and being able to plan for the year or quarter based on available funds is essential for ensuring dollars go where they bring in the most value.

Creating a realistic marketing budget for your unique organization will depend on your industry, business goals, audience, annual marketing strategy, and available funds for the budget. 

Follow these steps to start estimating your budget so you can spend and save with more confidence:

1. Set Clear Marketing Objectives

First, make sure your organization has clear marketing goals. For example, if one key objective this year is to build up your business blog with consistent content, a lot of your budget may be allocated toward content creation and promoting your blog.  

However, your goal might instead be cultivating brand recognition through more broadcast ads, maintaining contact with current customers through email marketing, or other pursuits. 

It is just as important to know the time span for your goals and campaigns as it is to know the goals themselves. For example, you may want to prioritize brand awareness in the spring while spending more of your budget on customer acquisition during the holiday season. Once you know your objectives, you can allocate the funds that will serve those goals.

2. Analyze Past Performance

Your previous marketing efforts can act as a template for your future spending. Begin by identifying which campaigns and strategies had the greatest effects and generated the highest ROI.  

Conversely, identify the campaigns that had the smallest (or negative) benefits. You can highlight must-do campaigns and cross projects off your list so your marketing dollars go where they will matter most.  

However, if you don't have past marketing analytics or are not sure about their accuracy, that is okay! Setting an estimated budget and regularly checking in with real-time analytics will help you fine-tune your budget based on performance.

3. Know Your Target Audience

Accessing different markets can cost different amounts of money. For example, certain keywords may resonate more with some demographic audiences than others, and those keywords may cost more money. Similarly, some radio stations and digital platforms will cost more than others. 

To refine your marketing budget, identify your target audience and determine which channels or approaches align best with those audiences. Then, you can fit the pieces together based on your total available budget.

4. Research Industry Benchmarks

Use general industry trends to help guide your marketing budget. Find industry benchmarks that gauge how other companies in your sector spend money across different channels.  

These can help you form an initial budget as you start to refine and customize your spending categories to fit your business.

5. Consider the Customer Acquisition Cost (CAC)

The customer acquisition cost (CAC) is a metric that measures how much you will spend on average to acquire a new-to-you customer. If you know this cost, you can do the math to determine your total spending based on your goals and ensure your efforts maintain an ROI within acceptable parameters.  

Make sure you calculate your CAC to include all marketing costs across every channel and that your attribution models are as accurate as possible.

6. Set Percentage Revenue

Many businesses will set their budgets for different departments or projects based on revenue rather than a fixed number. For example, many businesses will allocate between 5% and 15% of their revenue to marketing efforts.  

This approach can leave you a little uncertain when setting specific budgets for ad spending or committing to third-party contracts, but it can help to ensure marketing spending does not outstrip revenue.

7. Prioritize Marketing Channels

Unfortunately, not having an unlimited marketing budget means you can't market across every available channel. Instead, it's important to prioritize the channels that are most important for your audience and, therefore, your business.  

Allocate most of your marketing dollars to the channels with the most effective reach and conversion power, whether those are the channels that have historically performed well for your business or (if you don't have that data) the ones that are most promising based on your target market and industry research.

8. Consider Seasonality and Industry Trends

Different industry and seasonal trends will also impact how much money you should spend and when you should spend it.  

For example, clothing boutiques aimed at teenage markets may see a lot of their sales in the back-to-school season, while many retailers see most of their business around the holidays. Adjust your budget so you can have enough money around peak seasons instead of splitting it evenly across the year.

9. Monitor and Measure Results

The most important thing you can do once you have an initial budget is to continually monitor results. You may find that one campaign is not performing well, so you will cut it and switch the money to a different campaign.  

Alternatively, one campaign may outperform expectations, and you will want to increase its budget. At the same time, be cautious about being too reactive—many marketing efforts will take time and will not provide instant results.

10. Flexibility for Experimentation

Do not put all your marketing dollars to work. Instead, reserve some of them for new opportunities so you can increase the range of promising campaigns. You will want to experiment as the market shifts and being unable to do so because of limited funds can lose your business a competitive edge.

Start Putting Your Marketing Budget to Work

Your marketing budget should have a blend of structured allocations so you can confidently move forward with the 'bread and butter' campaigns and some funds for testing and experiments. Preparing ahead of time can give you the best chance of allowing long-term efforts to move forward and build momentum so you have a continual pipeline of new contacts, promising prospects, and return customers.  

At Mid-West Family La Crosse, we are here to help you strategically plan your marketing budget, marketing strategy, and media campaigns. Contact us today to get started.