It’s great that you have a marketing plan, now you must determine how you will pay for your outreach efforts. In Part I of this series, we focused on how to develop a killer marketing plan. Now you need to budget what you will spend on marketing. Creating a budget is not always the fun part of marketing. But taking the time to plan and determine how much money you can spend will help set you up for success as you move your business forward.
It’s also important to be realistic and prioritize your resources. It’s tempting to want to spend money to do everything. But the reality is you don’t need to do that to successfully market your business. You do, however, need to be strategic about what you spend resources on and whether they will generate results. Here are five steps to help you set up your marketing budget.
- Start with your sales goals. Compare marketing costs to the number of sales you need to generate to get the cost of marketing per customer. Sales and marketing must complement each other. This means your marketing activities must be focused to generate the number of sales leads that you need to meet your financial projections. One way to do this is focus on a 30-day sales goal for your monthly marketing plans. What you want to avoid is overspending on marketing if you’re not going to make up that money in sales.
- Create methods to measure the return on investment of your marketing campaigns. You need to realize the highest possible return on investment (ROI) on each marketing dollar spent. ROI is the amount of money you are getting back from the dollars that you put into executing marketing activities. If any of the tactics that you’re using – events, coupons, direct mail, or social media – aren’t providing a return, then don’t continue to waste money on it.
- Measure your cost per acquisition. Calculate the rate at which you can convert leads into sales, and then determine what resources you’ll need to generate that number of new leads. For example, perhaps you spend $100 each month to create Facebook ads to target your prospective customers. This generates 100 leads, which are determined from people who click on the Facebook ad and visit your website to sign up to learn more about your company. Of those 100 leads, 50 become buying customers. You’ve essentially spent $2 per customer acquisition from Facebook ads.
- Track your marketing programs closely and make them flexible enough to change with market conditions. You may have your heart set on a particular marketing tactic, but if it doesn’t support your overall business or the numbers just aren’t working in your favor, stop that tactic and try something else. For example, Facebook may change its algorithms in a way that makes it difficult for people to see your social updates on your site. You can’t control that market condition. If this happens and people suddenly stop responding to your social media presence, be flexible enough to change your marketing strategy to another tactic.
- Allocate funding for future marketing efforts to continue to attract customers. Like with many activities, doing the same thing over time will get boring and can stop yielding results. Make sure you budget for future marketing projects that may attract new customers. Don’t rely on the same tactics forever when there may be different and better (not to mention cheaper) ways to attract leads.
It’s important that you are as accurate as possible in your estimation of the costs of your marketing tactics. There’s nothing worse than finding out at the last minute that you don’t have the money for some important marketing initiative. Making the time to create your budget before you start spending will help you avoid those situations.