Marketing and advertising initiatives are essential to every business, though many companies treat them as an afterthought. A business that operates without a marketing plan is unlikely to reach maximum potential, stunting their growth and making an inefficient use of their budget. But how do you determine the right budget for marketing and advertising?
When planning and budgeting, you must account for more than just the hard costs of the advertising medium itself. There are many different factors that influence the recommended size of your marketing budget. A billboard in Nebraska is not going to cost the same as one located in New York City. The market you are attempting to advertise in is the single most important marketing budget influencer.
Besides the actual cost of the media, what else do you need to consider?
- 1) How much will it cost to create the advertisement?
If you already have the assets you need to place your ad, that’s fantastic. Evergreen content – sustainable and lasting content that’s relevant to your company – will reinforce your brand and provide a consistent touchpoint for consumers. However, if you are a new business or have a specific goal in mind, it’s important to plan for the creation of new material. This can include video, photography, graphic design, copywriting and more.
- 2) What kind of human resources will you need?
In addition to that new material, someone on your team will need to help make it happen. You’ll need to decide if your business has the capabilities to complete the project internally. If not, you’ll need to seek outside help from an agency to provide the manpower and skill. Remember to account for a point person within your company that will work with the agency you choose.
- 3) How will you track ROI?
Methods will vary based on the goals of your campaign. Raising brand awareness, launching new products and increasing return customers will all have different metrics to indicate success. Determining what benchmark is considered successful and tracking those metrics from day one of your campaign will contribute to your future strategic plans and validate your methods. And if you can track your results year over year, your marketing budget will work that much harder for you.
- 4) What cost per conversion is within your comfort zone?
Finally, and especially with digital advertising, you need to determine what amount you are willing to spend on closing a lead. This is easier for B2C companies as they have already determined a range on each product, capping the total amount to spend on converting leads. B2B companies have a different industry landscape, though, and would do better with a sliding scale for converting leads.
What do you get when you invest the time, human resources, mind power and skill in your advertising campaigns? Growth. Salesforce, a client relationship management software company, invests more than half of their annual revenue each year in marketing and advertising for their own company. The result? They grew 33% from 2013 to 2014, and also hold a considerable share of the market in the CRM industry.
You can bet that a company that spends half their revenue on marketing and advertising has a well thought out strategy, a detailed calendar and premium assets that ensure their investments bring back returns. Why should your company be any different? Most companies cannot afford to spend half of their annual revenue on marketing; but at the same time, no company can afford to spend money on haphazard advertising and patchwork strategy.
The bottom line is that good, strategic marketing is not just an expense, but an investment in the growth of your company. Thoughtful strategy and intentional advertising will make your company money, so be sure to allocate enough of your budget to cover all aspects of your marketing and advertising initiatives.