A Guide for Creating your Marketing-Comms Budget
From my experience directing the marketing-communications activities of two of the helicopter industry’s largest maintenance, repair and over haulers, a few of the questions that were consistently posed to me were: “how much should we spend on marketing,” and “how do we make that budget decision.”
Well, we’re about to address these questions by offering some insights based on experience, and that you can trust as a guideline for your budgeting activities.
While variation exists between industries… and even within industries for those who service specific niche segments; studies that examined a number of diverse industrial and commercial sectors identify an average of five percent of percentage of sales (however this number is conservative, and depending on tour business/product or service… may be higher) is a good baseline to use for your marketing-communications activities.
When considering the elements that will make up your annual marketing-communications activities and budget (based on your business model) you will want to include some or all of the following:
- Print and traditional broadcast (tv/radio) advertising (development and insertion or air time)
- Development, design and printing costs for all print and digital materials
- Website development and maintenance
- Social/new media activities
- Media release development and distribution
- Trade shows, tradeshow assets and promotional goods
- Signage and other branded assets (stationary, vehicles, etc)
- Other special events or activities
To effectively allocate these financial resources, I highly recommend that you:
1. determine your business objectives
2. identify the key areas of marketing focus
3. determine a dollar value for each of the above categories based on your strategy and tactics.
To assist those not familiar with developing a marketing-communications budget, its may be easier easier to begin with a top line total estimate for the entire marketing budget based on, for instance, percentage of sales, and then divide it into the categories identified. This at least enables you to work through the numbers and critically examine the distribution and planned utilization, and make necessary adjustments as you work through your planning.
Also, as no two businesses are the same, your approach to budget development may require different approaches.
The following are four standard budget allocation methods:
This is a popular method for developing a marketing budget.
The average allocation ranges between 5-12% of the sales budget, while smaller operations may be as low as 2-5%.
The advantage is the marketing budget increases or decreases, corresponding to sales performance.
The disadvantage is that with a new or growing company; this can hinder brand/product/service visibility and as a result; hinder sales potential.
Many businesses establish a one-size-fits-all base dollar amount for their marketing budget. This approach can be particularly useful for small businesses.
Establishing a flat budget may also be effective for companies looking at a one-time expense, such as specific marketing or a trade show activities, however this approach is not recommended for a long-term marketing plan focused on business growth.
3. Competitor Matching
Simply put… this is a method of copying what the competition is doing.
However, this method assumes competitors are utilizing their budget resources optimally and achieving the desired results, and that your business and financial position are comparable.
In short; due to far too many unknown variables, Competitor Matching is not recommended.
4. Marketing Plan Model
This is perhaps the most effective budgeting method, as it considers both business and sales objectives to determine the marketing budget.
The budget is established by estimating the costs of activities — down to the tactical level, required to achieve those business and sales objectives. Sure, this method takes a little more time and consideration to pre-planning of the details; however it facilitates the best opportunity for effective utilization of financial resources, and offers the highest potential for return on investment.
I highly recommend the Marketing Plan Model, and use it consistently for my business and my clients.
So, in addition to the four budgeting methods referenced, there are times when the budget number will increase or decrease… depending on the specific initiatives you will have identified for your business.
The following is a basic guide to consider for these initiatives that either should be added to – or removed during your budget development process:
- New business/brand (based on business plan-year 1 revenue) +5%
- Introduction of a new product or service: +2–5%
- Competitive positioning: +2–5%
- Brand reposition or realignment: +2–5%
- Establishment /expansion to new markets: +2–5%
- Establishment of new media processes: +2–5%
- Brand securely established in market: -2–5%
- Mature product lifecycles: -1–5%
- Utilization of new media versus traditional: -1–5%
Budget Development Considerations:
- Regional versus national or global focus
- IMC mix (ie: use or publicity/promotion/ new media, etc)
- Type of product/service (niche versus general/commercial, etc)
- Target audience
- Optimal channels for message delivery and feedback
Keep in mind; the marketing of your business is equally important to the ‘bricks and mortar’ aspect of your operation.
You can have the greatest business/product or service in the world; however if your clients don’t know you are out there and ready to support them… your competitors will ultimately come out on top.
For more information, contact: RESULTS@ABSOLUTEMARKETING.CA