How to Strategically Set a Marketing Budget

It’s an age-old question: How much should a company spend on marketing? Just like your retirement savings, a marketing budget is not how much you have “left over” after you pay all of your expenses; rather, it’s an investment in your future with a clear ROI the same as your 401(k).

Let’s explore how to strategically set a marketing budget for businesses of any size.

Top-down

The CEO, CFO or CMO simply decides how much will be spent. The beauty of this approach is simplicity. A number is set, and the marketing department or agency decides how the money will be allocated. However, since sales and marketing goals are not considered, this approach to budgeting is done in a vacuum without context.

Zero-based

Specific projects are identified, plans determined, and budgets are established. Marketing and sales goals are considered, but analytics may not play a key role, so inefficiencies can occur.

Analytic-based

Begin by identifying a specific sale or revenue goal. The goal allows you to analytically back into how many leads need to be generated based a standard conversion rate within a given industry. The Conversion Rate Optimization (CRO) then determines what strategic website campaigns and offers are to be developed to attract the leads needed. These campaigns will need to be specific to your various buyer personas to be most effective. The trick here is to be ready to pivot based on how well each campaign does in attracting leads. We typically recommend developing several campaigns for a specified budget, so specific marketing pieces can be altered as needed.

Still struggling with the numbers? Consult with your marketing agency. They should be able to provide pro forma budget sheets to get you started, and can provide helpful advice on how to prioritize your marketing dollars.

At MZ, we give new clients a pro forma sheet and then collaborate with them to determine marketing spend by quarter and by priority, building an effective marketing program to validate ideas and even out the marketing spend.

However you decide to allocate your marketing dollars, spend time on the front end planning and analyzing. Marketing and brand decisions are some of the most important decisions you’ll make—these decisions will determine the success of your businesses for years to come. Do your research up front, consult with your agency and put together a solid plan that allows for flexibility.