How to determine your marketing budget
If you are a business owner you may dream of having an unlimited budget, for marketing. However, that while the reality is that businesses have to spend money to make money, most companies do not have a large marketing budget. It is crucial, for business owners to take a close look at every dollar that is being spent on marketing, and determine not only if it is the right amount, but if the money is being spend in the right place. There are several different ways that each business owner can look at their marketing budget. Here is what you need to know about how to determine your marketing budget-
- Outspending the competition-Many businesses feel that their marketing budget should be just a little more then their closest competitor. Business owners often take a close look at what their competitors are spending on marketing and then figure their budget, to be slightly larger. While this may seem like the right strategy, this can actually be very difficult to do. Not only will you have a difficult time finding out how much your competition is spending, you will also need to know where they are spending it. Remember, that great marketing is not just about how much you spend, but where it is being spent.This solution does have some merits though. Knowing what your competition is spending, can give you some idea of where to start with your marketing budget. You can at least get a minimum idea.
- Putting all the extra in-When business owners take this approach to their marketing budget, what they are doing is spending any extra money on marketing. This means that they really don't have a set amount, for a marketing budget, but are waiting for cash overages, that they can spend on marketing. This is an extremely risky solution to designing a marketing budget. If your business has a regular cash overage, this can work, but if you have to wait to long, for extra cash, you may never be able to get a regular marketing message established.
- Using a percentage of sales-Many businesses choose to base their marketing budget on a percentage of their sales. They use this percentage to take care of any marketing needs. Most business owners who use this approach use between 5-10% of their revenue, with smaller businesses using more and the largest companies using less. This can be an effective way to determine your marketing budget, since marketing and sales will have a direct correlation.
- Cost per customer-Many businesses choose to use a cost per customer calculation when determining their marketing budget. If want to attract a certain percentage of customers, you will need to figure the costs of gaining a new customer. Then you can figure out how much marketing budget you will need to achieve that goal. This can be a highly effective way to establish a marketing budget, if you have the correct data, to figure the number on. If you don't have the data or can't get it, then this is not the right approach, for establishing a marketing budget.
- Don't worry about it-It is surprising to learn that many businesses don't have a marketing budget. This is due in large part to the many low cost and even free marketing options that the internet presents, for most businesses. There are businesses of every size that are presently spending very little on their marketing and being successful. However, business owners and their marketing teams should be prepared to spend a considerable amount of time on their marketing, in lieu of the money that they would have spent otherwise.