How to Calculate the Marketing Budget? The Complete Guide

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The marketing budget is one of the fundamental pillars to consider to ensure the success of any business, but how do you calculate it? Its real importance is often underestimated, leading to mistakes.

In this complete guide, we’ll try to fully explain its significance, the creation process, and the strategic placement methods. By doing so, we hope to clarify your ideas a bit more, giving you a good starting point to think about the marketing budget to allocate for your activities!

 

What is the Marketing Budget?

Let’s start with the basics and definitions. To be clear and concise, the Marketing Budget is simply the specific amount that companies decide to allocate to all activities related to marketing and advertising. You’re probably wondering how to calculate this sum.

To begin with, you’ll need to consider three key factors:

1. The financial resources you have available;
2. The time you have at your disposal;
3. The objectives you want to achieve and their magnitude.

Keeping these three elements and their “quantification” in mind is absolutely necessary to ensure that “realistic scenarios” are created and defined, so that you can know precisely how much you want to spend and how much you want to earn.

 

How to set up a Marketing Budget

There are several approaches you can use:

1. You can start from your annual revenue and establish a percentage. Keep in mind that the percentage varies depending on the company’s reality; for example, for small businesses and startups, it’s typically around 20%. Medium-sized companies commonly allocate a percentage ranging from 5 to 10%, while large ones allocate from 2 to 5%.

So, based on your gross earnings, you obtain a sort of “annual budget” proportionate to the size of your company.

 

2. Based on the financial availability of the business you want to advertise, you can decide to invest a certain amount;

 

3. If you have big ambitions but a limited budget, choose the path of financing and involving financial partners who can help you reach the predetermined amount and/or expert partners in marketing who can also assist you in terms of skills already present in the team;

 

4. Another option is to hire an external consultant to guide you in this endeavor.

 

Market Analysis and Marketing Budget: Why They Are Important

Before diving in completely, however, you need to have a clear vision of your business’s situation. How?

You need to conduct a thorough analysis of the various key factors that could influence marketing activities and the campaigns you want to launch.

For example, you should identify the strengths and weaknesses of the company, understand how the product you want to launch fits into the market, analyze competitors and their communication strategies, understand the target audience well, and define the objectives of each marketing campaign you will implement, including:

 

1. Awareness. To make yourself known to your ideal customers, to generate “awareness” of your existence in them;

2. Brand Reputation. To try to build a positive and reliable image of the brand, in order to generate “confidence” in the customer;

3. Rebranding. If you’ve recently found yourself needing to “renew” your company (you’ve changed values, colors, archetype, services, or products) and you need to be recognized;

4. Engagement. To generate interactions and consideration from the community;

5. Lead Generation. Generating targeted contacts, those who can become customers over time or if converted by the sales department;

6. Direct Sales. An achievable goal even without a sales department especially when we talk about low-ticket products, with the right budget (although it’s always advisable to have a sales and/or customer service department).

These are just some examples, and you should know that for each objective there are different dedicated strategies to achieve it, which involve real user journeys accompanied by tools such as: creation of optimized content, paid ads on Google, advertising on social media, sending marketing emails, online, hybrid, or offline events, etc.

Regardless of the strategy you choose, it’s important to define a clear marketing plan to monitor progress and intervene, if necessary, with corrective actions before it’s too late.

 

You will indeed need to consider the budget to pay for:

  • Advertising platforms such as Google, Meta, LinkedIn, or TikTok;
  • Your marketing department/agency that will help you grow online;
  • Software for carrying out activities;
  • Various marketing support expenses, such as event fees, advertising materials like commercial videos, brochures and signage, radio or television spots, press offices.

 

Never say “I have no budget!”

A representative of a serious company will never say they “have no budget” to invest in marketing activities.

This statement indicates that the company either lacks a modern structure and risks being swept away by the competition at any moment, or that the entrepreneur himself does not believe enough in his products and services.

Of course, not everyone has large financial resources, but it is always preferable to declare having a limited budget to allocate to marketing than to have none at all.

Being an entrepreneur means doing business, and it is always necessary to invest to achieve results.

Need some more advice to define your Marketing Budget? Request a free consultation with us. Our experts will be ready to help you!

 

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