Your marketing budget is an important aspect of your business. It ensures that your marketing dollars are spent wisely and in the appropriate areas. When you begin calculating your budget for the year ahead, it is best to start early – as early in the fourth quarter as possible - to determine what tactics you should incorporate to see measurable results. Below are a few best practices for effectively calculating your 2019 marketing budget.
Define Your Marketing Goals
Before you allocate the first dollar to any marketing endeavor, you need to set goals. Determining what you want to accomplish in 2019 will help guide your marketing plan and ultimately your marketing budget. There is no blanket rule for creating goals - yours will differ from others due to industry, target market, product or service, and other factors. But setting specific goals can be helpful in allocating your marketing budget.
Say you are planning to redesign your website. This may cost more than launching social media campaigns, so plan your budget accordingly. The cost of a new or redesigned website varies - from free to upwards to $15,000 - so evaluate your needs and choose an option that best fits your budget.
Examine Your Company Revenue
When you are determining your 2019 marketing budget, a good place to start is to examine your total revenue. You will want to look back at the last few years to review your annual gross revenue. Hopefully, you will see a steady growth trend. You can look at those trends and other factors that indicate anticipated changes to arrive at an estimated revenue for the upcoming year.
Take into Account Your Company Age and Status
It stands to reason that a newer company or start-up will need to invest more into marketing than one that is older and established. In theory, the newer company will be building their brand and building a strong customer base, while an older company typically has these things in place.
The trick is deciding where your company sits on the new to established timeline. A good rule of thumb is that a business that has been in operation 1-5 years is generally considered to be new, while a company that has been in business for five or more years - and has market share and brand equity - is considered established. And according to an article on Entrepreneur.com, new companies should spend around 12-20% of their gross revenue on marketing, while established companies should allocate between 6-12%.
Consider Competition and Market Share
Where you stand against competitors may also impact how you calculate your marketing budget. You’ll need to identify your top competitors, assess their status and evaluate their marketing efforts. From there you will need to structure a portion of your marketing strategy to specifically address that competition. So if your goals are to gain more market share in 2019, you’ll want to allocate more funds to your annual marketing budget.
Review Historical Data
Repeating the same mistakes year after year is a waste of time and resources. Instead, take a look at past budgets to see how they performed. For example, did you typically spend too much on digital advertising or spend too little on customer service? Use existing data to guide next year’s budget and to avoid repeating unprofitable activities in the upcoming year.
Analyze Current Marketing Trends
There have been some significant changes over the past few decades in how businesses allocate their budgets for digital and traditional marketing channels.
For instance, Statistica reports that radio advertising spend is expected to increase from $65 million in 2010 to $192 million in 2021. And in the same year, chief marketing officers (CMOs) will spend nearly $119 billion on digital marketing - including search marketing, display advertising and email marketing - according to Forrester Research.
Be sure to take these projections - as well as other marketing trends - into account when determining the tactics you should incorporate into your 2019 budget.
Evaluate Your Marketing Channels
Taking a shotgun approach to marketing is rarely successful. You can’t simply invest a small amount in every channel and hope for the best. Rather, you need to analyze your past marketing efforts, and focus your budget on channels that performed the best or that have potential to improve your marketing results. For example, if you’re looking to expand your reach in 2019, radio is an ideal channel as it reaches 92% of American adults weekly.
Also, take a look at the channels that didn’t perform well and evaluate potential reasons why. Not all channels will be appropriate for your business, so you may have to do away with some to allocate more to top-performing channels. Consider this information, along with industry trends and best practices, to find channels that align with your marketing goals.
Identify Marketing Partners
Marketing partners can be a huge advantage for your company’s marketing efforts. As you calculate your annual marketing budget, take some time to review your current marketing partners as well as potential partners.
- Have they helped you reach your marketing goals in the past?
- Can they help you reach your marketing goals moving forward?
- Do they offer industry insight or ideas that you can use in your own marketing strategy?
- Do they regularly connect with you to discuss new strategies, industry developments, marketing results, new creative ideas, and more?
Understand what you should expect from your marketing partners. Then determine which ones can impact your business and which ones aren’t moving the needle. You may need to make some adjustments in the coming year to ensure you’re making the best investments for your business.
Planning your marketing budget may take time and effort, but when done right, it can significantly increase your revenue and grow your business. As you sit down to begin calculating your 2019 marketing budget, take these factors into account in order to begin seeing real results.