A well-defined marketing budget helps you measure and manage what you invest in acquiring new customers and reconnecting with existing ones. It can also help you identify opportunities to optimize the tactics that result in the most bang for your marketing buck.
Here’s a deeper look at the importance of a marketing budget and how to structure one that helps improve your business.
It forces you to be more strategic. Much like a budget for your personal finances, a marketing budget forces you to think carefully about where you spend — and where you can save. This can be especially important for small business owners when the temptation to execute a last-minute social media campaign to drive lagging sales strikes. Or, when that aggressive salesperson from the local reviews based website or newspaper uses high-pressure sales tactics that are difficult to decline.
A marketing budget also makes it possible to measure the cost and performance of the many tactics that fall under the broad term of marketing, which may include:
- Social media ads
- Pay per click and banner ads
- Content marketing like blog posts, videos, infographics and podcasts
- Direct mail
- Targeted online display ads
- Email marketing
Your competitors measure what they spend. The majority of small business owners plan to invest more into digital marketing in 2017. Thirty percent say their marketing budget will increase considerably. Marketing isn’t just about getting your small business noticed: It requires that your messages are more relevant, more recognizable and more appealing to customers than your competitors. If you don’t know what you’re willing to spend to be competitive, you can’t accurately gauge if it’s too much, too little — or just right.
You can test variables other than marketing spend. If you don’t market or advertise heavily, you may be tempted to roll seemingly insignificant expenses related to marketing into some other line item in your budget. When you don’t carve out space for marketing expenses, you inherently lose the ability to test your marketing efforts. If you invest a small amount in an online ad and it proves successful in driving traffic to your site, for example, you may have an opportunity to improve the results by investing in more of the same. Likewise, when you have unsuccessful marketing efforts on your radar, you can test improved targeting; or different images, offers or copy to potentially yield better results for the same amount of money.
Marketing is directly correlated to sales. Most business owners wouldn’t dream of taking their eyes off sales and revenue-related figures, for good reason: They’re indicative of what’s happening in the business.
Marketing is directly correlated to sales. When you don’t measure marketing as a distinct budget, you could miss a critical opportunity to adjust customer acquisition and retention promotions to get revenue back on track when sales figures aren’t as strong as expected.
Marketing costs aren’t always obvious. Whether you market to customers in email, online or print, the ultimate goal is to establish or deepen the relationship with them. The more you understand what messages and tactics customers respond to, the more optimized your marketing efforts (and investment in them) become.
Without a marketing budget, you can’t know the “all in” expenses that go into a marketing effort, which could include:
- Design and production resources
- Cost of offering the customer a special discount or promotion
- The time and energy someone on your staff put into the campaign — or whether any of it was cost-justified
A marketing budget can help you identify the most intelligent ways to acquire customers, ask for repeat business and build loyalty. When you have a marketing budget, you’re empowered to measure and manage what you pay to build your business to determine how your many marketing efforts unfold.
About the Author: Tim Roach is Co-Founder of Lendr, a provider of merchant cash advances for small to mid-sized businesses. Roach founded a proprietary trading firm, Oak Street Trading, in 2002. He previously served in the United States Navy at Seal Team One.