How to Create a Marketing Budget in 7 Simple Steps

Are you looking to expand your marketing efforts but aren’t sure where that leaves you financially? It sounds like you need to create a marketing budget and allocate resources to specific marketing activities. In this blog we take you through creating a marketing budget, the various costs that you’ll need to consider, a variety of channels you might want to use, and how to allocate your budget to those channels.

Key Takeaways

Here’s how to budget for a marketing campaign. Note that you should have a set overall marketing budget in place before beginning.

1. Define your goals
2. Determine your audience
3. Work out monthly expenses
4. Research the competition
5. Analyse past performance
6. Allocate budget & choose marketing channels
7. Measure performance

What is a Marketing Budget? 

A marketing budget is essentially a plan of where a business intends to allocate money towards marketing activities within a specific time frame. Such budgets are typically established on an annual or quarterly basis.

The amount of money allocated to a marketing budget will depend on the size of the business and current state of finances, industry norms, business growth stage, location, customer base and expectations and overall business strategy. 

Often, as part of a marketing budget, businesses factor in expenses such as:

• Team salaries
• Software
• Website hosting and other associated costs
• Advertising
• Outsourcing
• Costs related to specific marketing channels

How to Calculate Budget for a Marketing Plan

There are a number of ways to calculate your budget for a marketing plan. Common approaches include:

Spending a Fixed Percentage of Your Revenue or Overall Budget on Marketing

This method will see you allocate a set percentage of your total revenue or overall budget for marketing activities. This will be influenced by a number of factors including revenue, company growth stage and industry-related factors. 

For reference, the average company in the UK spends roughly 9.1% of their annual revenue on marketing. For a business with a £1 million turnover, this equates to a marketing budget of approximately £91,000.

Basing Your Marketing Budget on Industry Benchmarks

With this method, you research what other businesses in your industry spend on marketing, which then informs your marketing budget allocation. Whilst every industry has marketing norms and benchmarks, some businesses will spend more or less based on their own goals and strategies. As such, you’ll need to research a good number of businesses to take an average. 

Some of the benchmarks you’ll need to research include:

• Total amount spent on marketing
• Favoured channels used
• How much is spent on each channel
• How effective these channels are for similar businesses to yours

Allowing Your Goals to Determine Your Marketing Budget

With this method, you’ll need to work backwards. Start with the business outcomes you want to see and work backwards from there. For example:

You have a goal to acquire 100 leads per month using a specific channel. To know how much budget you need for marketing activities to reach this goal, you’ll need to know how much it costs to acquire just one lead via your chosen channel. Then multiply that by your goal number and add any fixed costs such as payroll, software or outsourcing.

Repeat this process for each marketing goal.

How to Allocate Budget for Digital Marketing

When calculating budgets for digital marketing, things differ slightly from more traditional marketing channels, as there are often other expenses to consider, especially if you outsource it to a specialist agency. Below we break down associated costs for some of the most common digital marketing channels.

SEO

When it comes to determining a budget for SEO, you’ll need to consider the following costs.

• If you use a specialist SEO agency, you’ll need to work out a retainer. This is usually a monthly fixed payment.
• Salary for either
  • A) the agency’s point of contact on your side – learn more about what this involves in our blog, Why Does an SEO Agency Need My Input?
  • B) Any internal parties that work on SEO in-house
• Software and licensing. An agency will factor this cost into their retainer, however if you choose to do SEO internally, this might include such tools as:
  • SEMRush or Ahrefs for keyword research
  • Screaming Frog or Sitebulb for auditing your website
  • Advanced Web Rankings for keyword tracking
  • Prowly for PR
• Website-related costs such as:
  • Development work 
  • Hosting
  • Premium plug-ins

PPC & Paid Social

When it comes to determining a budget for PPC and Paid Social, you’ll need to consider:

• If you use a specialist PPC agency, you’ll need to work out a retainer. This is usually a monthly fixed payment.
• Salary for either
  • A) the agency’s point of contact on your side
  • B) Any internal parties that work on SEO in-house
• Software and licensing. An agency will factor this cost into their retainer, however if you choose to do SEO internally, this might include such tools as:
  • SEMRush or Ahrefs for keyword research
  • Screaming Frog or Sitebulb for auditing your website
• Ad spend budget per channel
• Platform fees
• Graphic design

Learn more about what a PPC agency does with your money in our detailed blog on the topic, What Does a PPC Agency Do With the Money We Pay Them?

Social Media

Social media marketing is another common digital marketing channel. To determine a budget for it, you’ll need to consider the following:

• If you use a specialist social media agency, you’ll need to work out a retainer. This is usually a monthly fixed payment.
• Salary for either
  • A) the agency’s point of contact on your side 
  • B) Any internal parties that work on social media in-house
• Software and licensing. 
• Ad spend if you choose Paid Social
• Graphic design

Common Marketing Costs to Consider

We’ve already mentioned some of the top marketing costs that you’ll need to consider when creating a marketing budget. But, for quick reference, here’s a list of some of the most common expenses involved in marketing that you might not have even thought about:

• Web development
• SEO
• PPC, Paid Social and other ads
• Software and licencing
• Salaries
• Equipment and overheads
• Freelance help
• Outsourcing or agencies
• Venue rental for events
• Printing
• Influencer marketing costs
• Branded promotional items
• Staff training
• ICO data protection fee

How to Budget for a Marketing Campaign in 7 Simple Steps

Now you know what you need to consider as part of your marketing budget, here are our seven simple steps to actually creating the budget. 

1. Define Your Goals

Regardless of which route you choose, you’ll need to first define your goals – what is your ideal outcome from doing marketing? 

We recommend that you use the SMART goals framework for creating clear, realistic and achievable goals.

• Specific – be clear and precise about what you want to achieve.
• Measurable – ensure that your actions are measurable. Set KPIs to track progress and ROI.
• Actionable – Make sure that your goals are realistic and achievable with the resources you have available (or are willing to invest in).
• Relevant – your goals should align with wider business objectives.
• Time-bound – establish clear timeframes and deadlines. Try to include milestones along the way to measure progress.

2. Understand Your Audience

Next, you need to understand who your audience is, what drives them and how to best reach them. Creating customer personas is a great way to do this. Note that you can have more than one!

To create customer personas:

• Gather data about your current and prospective customers. Surveys, interviews and data from tracking tools such as Google Analytics can help here.
• Look for patterns to reveal drivers and motivations. 
• Look for pain points.
• Review the customer journey.
• Look at demographics and psychographics
• B2B or B2C?

It’s much easier to market and sell products when you know who you’re targeting and what their needs are. Be sure to spend time creating a few customer personas before you continue with creating a marketing budget. 

3. Determine Monthly Expenses

It’s important to understand operational costs before you start thinking about additional costs. Things such as:

• Salaries
• Software, licensing and other subscriptions
• Website fees
• Advertising costs
• Outsourcing

This list will vary from business to business depending on where you currently spend money. This should be used as a baseline that can serve as your new minimum monthly budget for marketing. You can then build on this with new initiatives.

4. Research the Competition

What are your competitors doing? You can take inspiration from their marketing efforts to better your own. Learn from their successful campaigns and try to spot any gaps in their strategy.

This information can help you to build your own strategy and therefore guide your budget. 

5. Analyse Past Performance

If you have previously conducted marketing efforts, you’ll need to review past performance to determine if they were worth the investment. Here are a few metrics to review each activity for:

• Revenue growth – increase in revenue 
• Number of sales – increase in sales 
• Number of qualified leads – increase in legitimate leads
• Number of impressions – how many users saw your marketing efforts
• Click-through rate – how many of those users that saw your efforts clicked on it?
• Conversion rate – percentage of users that completed a desired action
• Return on investment – revenue growth minus marketing costs
• Cost per conversion – average cost per conversion action 
• Organic traffic – increase in traffic that comes from search engines
• Direct traffic – increase in traffic that results from a user directly inputting your URL over 
• Keyword rankings – increase in total number of keywords or positive keyword movements 

Once you have this information you can determine if each channel was successful and worth the investment. Thus, informing your new strategy and budget. 

6. Allocate Your Budget & Choose Marketing Channels

It is recommended to use the 70-20-10 rule when allocating your budget. By this point, you should have an overall marketing budget set and now it’s time to allocate the budget to specific efforts.

• 70% goes to proven channels. Those that have been known to yield results and align with goals. 
• 20% goes to newer or less established strategies that may have gained traction and show promise. 
• 10% goes to trialling new, unproven ideas. 

Within this 70-20-10 formula, you’ll still need to choose your channels wisely. Not all marketing efforts work for every goal and outcome. When doing this, consider your business model, your audience, strategy, goals and budget.

Learn more about planning your marketing strategy in our dedicated blog, Devising Your Marketing Plan For The Year Ahead.

Here are just a few possible channels you might want to explore as part of your strategy:

• SEO
• PPC
• Paid Social
• Organic Social
• Print media
• Email marketing
• SMS marketing
• Influencer and affiliate marketing
• PR
• Billboards
• Events
• Broadcast media

7. Measure Performance

Now you have your budget and have allocated it to various channels, it’s time to put everything into action and track performance over time. From here you’ll be able to work out your return on investment and have all the information you need to work out budgeting next quarter/year.

Discover Effective Digital Marketing Channels with Wildcat Digital

If, after putting together your marketing budget, you’ve decided to invest in SEO, PPC or Paid Social but aren’t quite sure where to start, get in touch with the experts at Wildcat Digital. We offer a free initial consultation to give you the opportunity to ask any questions you might have and work out if it’s the right marketing channel for your business.

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FAQs

When Should You Review/Create Your Marketing Budget?

Marketing budgets are typically reviewed either annually or quarterly. If you do this annually, it is best to align your budget with the new tax year in April.

Are Marketing Costs Tax Deductible?

Many marketing costs are tax deductible as they are considered an essential part of running a business. Some examples of marketing activities which are tax deductible include:

• Mailshots and direct marketing
• Trade body membership
• Social media
• Advertising
• Website costs
• Sponsorships