How to Plan a Marketing Budget in 6 Simple Steps: 2021 Guide
You finally decided to take the leap and invest in digital marketing services. As you sit down at your computer and start researching strategies, you stumble across some prices, and it causes you to pause. You say to yourself, “Wait a minute, can we afford this?”
Without a marketing budget plan in place, you have no way of knowing.
But luckily, we’ve got all the information you need to know how to plan a marketing budget for 2021!
Before you continue scrolling, watch our video featuring Dan from the WebFX Strategy team to get some expert advice on how to allocate your marketing spend for the next year.
Now that you’ve (hopefully) watched our video, keep reading to learn more and subscribe to Revenue Weekly for the latest tips and tricks about marketing!
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Their focus on ROI and their innate ability to communicate this information in a way that I understand has been the missing link with other digital marketing firms that I have used in the past.
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Table of Contents
- What is a marketing budget?
- Why have a marketing plan budget?
- How to plan a marketing budget
- Try our marketing budget calculator
- How to determine your overall marketing budget
What is a marketing budget?
A marketing budget documents how much your business plans to spend on marketing over a specific period, like a year, quarter, or month. When budgeting for marketing, consider all costs associated with marketing your business, such as paid ads, hiring costs, marketing tools, website maintenance expenses, and more.
Why do I need a marketing budget for my business?
Wondering why you need a marketing budget for your business in 2021? Here are five of the top reasons.
1. It helps you stay on track financially
If you’re diving into developing a marketing strategy, you need a budget to help you stay on track financially.
When you create a marketing budget, you’ll be able to keep track of how much you spend on each strategy, if you’re overspending, and if you can spend more. If you skip creating a marketing budget, you’ll likely find yourself overspending, which can cause your business to fail.
2. It helps you allocate funds into the right places
A marketing budget plan will help you put your marketing funds in the right place.
When you know how much you can spend, you know how much you can put into each marketing strategy of interest. It allows you to determine which strategies work with your budget or if a digital marketing company’s packages fit within your budget.
3. It helps you set benchmarks and goals
Having a well-defined budget helps you set realistic benchmarks and goals that move your business forward. Based on your budget, you can set realistic expectations for various marketing channels and better understand the revenue you need to earn to make your marketing efforts worthwhile.
4. It helps you plan long-term
Planning your 2021 marketing budget ahead of time gives you more certainty and allows you to create a longer-term plan for your marketing. This long-term perspective prevents you from having to fight for additional marketing spend throughout the year and stop campaigns due to funding changes. While you want to build some flexibility into your budget, a long-term funding plan enables you to create a more consistent and effective marketing strategy.
5. It’s an investment in your business’s growth
When you think about investing in marketing methods, you may see marketing as just another cost for your business.
It’s important to note that marketing isn’t a cost — it’s an investment. Marketing is an investment in your business’s growth and development. By learning how to make a marketing budget, you’ll help your business get the most out of your investment.
How to plan a marketing budget for 2021 in 6 steps
Now that you know why a marketing budget is essential, it’s time to look at how to prepare a marketing budget and prioritize it.
Check out these six critical points you’ll want to establish to set up your marketing budget.
1. Establish your sales cycle
When you create your marketing budget breakdown, you want to establish your sales funnel. Your sales funnel is a critical component of your marketing budget because it determines where you’re going to spend your money.
Your sales funnel is the process your audience goes through to become a paying customer. A typical sales funnel will have four stages:
- Awareness: At this stage, your audience becomes aware that they have a problem and starts looking for solutions.
- Consideration: At the consideration stage, your audience starts to look at the options available to them.
- Decision: When a lead reaches the decision stage, they start to narrow their focus on companies that provide the best solution or product for their needs.
- Action: Once a lead reaches the action stage, they choose your business and become a customer.
Understanding your business’s sales funnel helps you see where you may need a digital marketing strategy to help you keep more people from falling out of the funnel.
For example, let’s say you notice that your business’s funnel has a ton of people at the consideration stage, but very few make it to the decision stage. While some drop-off is natural, you notice that the decline is more significant than what you’d expect.
As a result, you may find that you need to budget more money for strategies that will help get leads from the consideration stage to the decision stage. Strategies like video marketing, pay-per-click (PPC) ads, and social media ads may help you push those leads down the funnel.
So, to help you understand how much you need to budget for marketing, you need to understand your sales cycle. Knowing your sales cycle will help you anticipate strategies you need to invest in, which will help you budget for your marketing plan wisely.
2. Know your outside costs
If you want to know how to prepare a marketing budget, start by establishing your external costs. You need to know how much everything costs your company, so you know how much you can allocate for marketing.
So, what are outside costs you need to consider?
- Operational costs (creating products, shipping them)
- Costs for employing staff
- Costs for running your business (electricity, water)
- And more
You must consider these costs when creating your marketing budget plan.
Not only does it determine what services you can invest in, but it also helps you set a baseline for your return on investment (ROI).
So, for example, let’s say it costs your business $10 to produce your product. You sell your product for $50. So, when you’re choosing marketing methods for your business, you have an idea of how much you want to spend so you can still make a profit off your item.
This information will help guide you to strategies that allow you to get the best ROI for your business.
3. Determine your business’s goals
Every guide on how to create a marketing budget will say that you must establish your business’s goals — and it’s true! You need to know what you want to achieve, so you can set a budget that allows you to achieve those goals.
You can set goals that focus on:
- Earning more sales
- Increasing leads
- Earning more subscribers
- Increasing brand awareness
- And more
When you set your business’s goals, make sure they’re specific and smart. You don’t want to set a goal like “increase sales.” It won’t give you a precise target to work towards and achieve.
Instead, set a goal like “Increase sales by 20% by the end of the year” This goal is easily measurable and gives your team something precise to achieve. It’ll also give you a concrete reference point when budgeting for marketing because you know how much you want to increase sales by and the timeline for achieving that increase versus just knowing that you want to increase sales.
If you want to know how to prepare a marketing budget properly, start by adding your overall business goals so you can invest in the right marketing methods to help you reach your goals.
4. Understand your market
You need to know where you fit in your market to build an effective marketing budget plan. When you understand how you stack up against your competition, you can better establish which strategies you need to use to compete with them.
You’ll want to do a competitor analysis to see how your competition performs online. You can even use competitor analysis tools to help you see where your competition currently succeeds online. It can help you determine which strategies you’ll need to budget to drive success.
You can use a competitor analysis tool like CompetitorSpyFX to analyze competitor campaigns and get ideas for your own campaigns or use social media monitoring tools to keep track of what people say about competitors on social.
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5. Get an idea of what strategies you want to use
An essential component of preparing a 2021 marketing budget is choosing your strategies. You don’t need to be 100% sure about the strategies you want to use, but you should have an idea of which strategies seem to be the best fit for your business.
There are numerous digital marketing strategies you can use, including:
- Search engine optimization (SEO): SEO is the process of boosting your website’s rankings in search results to help drive more relevant, organic traffic to your page.
- PPC advertising: PPC ads are paid advertisements that appear at the top of search results pages and on other web pages. These ads allow you to reach more leads that are ready to convert.
- Social media marketing: Social media marketing enables you to connect with your audience one-on-one and deliver informative content to them. This strategy allows you to build relationships with leads and nurture them into customers.
- Social media advertising: If you invest in social media advertising, you’ll focus on creating compelling ad copy targeted at specific leads. These ads appear seamlessly in their newsfeed, allowing you to build brand recognition and earn more leads.
- Email marketing: Email marketing enables you to nurture leads towards conversion by sending them tailored content that fits their interests. You can send promotional emails, exclusive deals, abandoned cart reminders, and more.
- Content marketing: Content marketing enables you to drive more leads to your page by sharing valuable information with your audience. Whether it’s blog posts or videos, you can share your knowledge with your audience and establish yourself as an authority in your field.
- Local SEO: With local SEO, you optimize for local keywords and claim your Google My Business listing to help drive more local traffic to your business. Below, you can see an example of a GMB listing!
- And more!
You’ll want to have an idea of which strategies you want to use for your business when creating a marketing budget. When you know which strategies you want to invest in, you can determine how they will fit into your marketing budget plan. That brings us to our next critical component of how to plan a marketing budget.
6. Research strategy prices
Whether you’re going to run your campaigns on your own, hire a freelancer, or hire a digital marketing company, you need to know how much it costs.
Your marketing budget breakdown should focus on how much each strategy will cost your business.
First, you must determine who you want to handle your campaign:
- In-house: If you decide to stick to your in-house team, the cost will come in the form of salaries and materials you need to execute your campaigns. You may still need to hire outside help or invest in tools that enable you to manage your campaigns.
- Freelancers: Freelancers are people who specialize in one type of strategy or dabble in a few of them. If you hire a freelancer, you’ll typically pay by the hour or on a per-project basis. The prices may be higher if the freelancer is more experienced or uses software, which they include in their rate.
- Digital marketing company: If you hire a digital marketing company, you’ll get everything you need, from tools to people. Unless you’re doing a one-off project, you’ll pay per month to keep a digital marketing company on retainer.
Typically, if you’re busy running your business, you’ll want to rely on a digital marketing company. It allows you to reap the benefits of having a marketing plan and someone to manage your budget, while you worry about other aspects of your business.
How much do professional digital marketing services cost? To help you get an idea, here’s a range for how much you should expect to pay for online marketing strategies from a digital marketing company:
- SEO: $500 – $20,000+ per month
- PPC: 5-20% of monthly ad spend
- Content marketing: $2000 – $20,000 per month
- Social media marketing: $250 – $10,000 per month
- Email marketing: $300 – $2500 per month
These prices will vary depending upon your business and what you need. But this range is about how much you can expect to pay if you partner with a digital marketing company.
By knowing these costs, you’ll know how to prepare a marketing budget better, so you can use the strategies that will drive the best results for your business.
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Try our marketing budget calculator
Want some help deciding how much of your budget to allocate to each channel? Try our free online marketing budget calculator. Simply input some information about your goals, and you’ll get a free marketing budget plan breakdown. You can also adjust your goals as many times as you’d like.
How to determine your overall marketing budget
If you’re wondering how to determine the size of your overall marketing budget, this data-backed breakdown for creating a marketing budget will help. You can learn how much your business should budget for its marketing plan by looking at your industry and its average marketing spend in the table below.
|Industry||Marketing Budget (% of Company Revenue)|
|Mining and construction||3%|
|Consumer packaged goods||9%|
|Banking, Finance, Insurance, and Real Estate||8%|
Besides industry, your business can also look at its age and overall market.
- Age: Businesses between one and five years old should invest 12% to 20% of revenue towards marketing, and businesses older than five years should invest 6% to 12% of revenue towards marketing
- Overall market: Business-to-business (B2B) companies should invest 7% to 8% of revenue towards marketing, while business-to-consumer (B2C) companies should invest 9% of revenue towards marketing
Remember, though, that every company is unique. Considering your business’s goals when creating your budget is crucial. Depending on your organization’s goals and overall business strategy, you may opt to create a marketing plan budget that is higher or lower than your industry’s average.
To create a goals-driven marketing budget, determine your target cost for acquiring a new customer and how many new customers you want to gain through your marketing.
Then, multiply those two numbers and add in any fixed costs. For example, say your target cost-per-acquisition is $300 per customer, you want to acquire 200 new customers, and your fixed costs add up to $10,000. In that scenario, you’d use the following formula.
- (300 x 200) + 10,000 = 70,000
So, you’d need to allocate a total of $70,000 to marketing to achieve your customer acquisition goal.
As you run your marketing campaigns, you can track the number of new customers you acquired and your cost per acquisition to determine how well your campaigns are working and what you might want to tweak to improve performance.
Start preparing your 2021 marketing budget plan today
If you’re ready to dive into creating your marketing budget plan and hire a marketing agency, WebFX is here to help. With over 25 years of experience, we know how to prepare a marketing budget that works for your business’s unique needs.