As the year comes to a close, now is the time to start planning for 2021. We’re all eager to start fresh and make the most of the new year, but to do that it’s important to hit the ground running in January with a pre-established budget.
Determining how much to spend and where to allocate certain marketing dollars is not an exact science. Because it’s unique to each company, there are many factors to consider in developing a budget that encompasses your entire strategy.
To frame out what those considerations should be, we’ve developed a top 10 list of the most important factors when developing your budget. But first, let’s look at some high-level information on what others are spending these days and why…
What is a typical marketing spend?
According to the U.S. Small Business Administration, small businesses (under 250 employees) typically spend 7% to 8% of their total revenue on marketing. This is a healthy budget that, if spent strategically, will create a positive business impact. For larger companies (more than 250 employees), the marketing investment should be closer to 10% to 14%.
Another thing to consider is the age of your company. A company between one to five years old is still in the stage of establishing brand equity and therefore should have a slightly higher investment at around 12% to 20%. On the other hand, an older company with an established brand history can be in the 6% to 12% range and have a healthy marketing program.
You should further consider how heavily your company leans on online sales. The 2020 CMO Survey reported that companies with online sales above 10% typically allocate 13% of their total revenue to marketing efforts, versus 10% for companies that generate under 10% in online sales.
Now that we’ve considered a few key metrics, let’s look at the top 10 factors for framing out your budget:
- Effectiveness of past marketing budgets. Look at your previous marketing spend and determine what has been successful and what hasn’t. Clearly 2020 has been anything but normal, so it may be beneficial to also look at things that were implemented in 2019 and 2018 to get a full picture.
- Individual line items. What line items do you include in the budget? Knowing this helps the accounting department decide which budgets the money comes from. For instance, if you will be implementing an internal communication campaign, that expense might come from the HR budget. The top three items that Chief Marketing Officers (CMOs) typically include are: expenses that pay for marketing activities directly, social media, and marketing staff and/or a partnering agency (we recommend having both!).
- Annual expense increases. Have marketing or advertising expenses increased since last year? This could apply to ad buys or be a subscription price increase on software or automated services.
- One-time expenses. Are there any unique expenses that will occur once in 2021? For example, is it time for a rebrand? On average, most companies rebrand every seven years and spend between $50k and $150k to freshen it up across the board.
- Industry trends & events. What trends or events will require additional marketing in the coming year? An example of this could be the need to implement a product campaign that ties into the Olympic games, which happen every four years.
- New product/service launches. If your company is planning on rolling out new products or services this coming year, it might require a new brand to be developed. Is the website due for an upgrade? Are there any other plans for the company that would require additional marketing efforts (plans or strategies)?
- Seasonal spending. Is revenue impacted by seasonal occurrences? For instance, does the business see a dip in revenue in August when school starts? If so, it might be worth considering a boost in marketing in July to off-set the financial drop.
- Competitor spending. Do you know how much your competitors are spending on marketing? Are any of them planning a big rebrand or launching a new product/service? Since you’re likely marketing to the same audience, their plans can significantly affect yours. Without an equal response on your behalf, their marketing can result in a loss of valuable market share for your business.
- Individual tipping points. When it comes to marketing, there’s always an ideal level of investment for netting the most ROI (return on investment) in your industry. Likewise, spending under a certain amount doesn’t make sense in most cases because it won’t reach enough audience members to make a positive difference for your business.
- Flexibility. Always plan to be flexible. If COVID-19 has taught us anything, it’s that cultures, lifestyles, consumer attitudes, and business environments are fluid. There needs to be room to pivot throughout the year in order to adapt to unforeseen changes or challenges. Prioritizing your budget will help guide those decisions in the future.
Turn to an expert to ensure you’re budgeting effectively.
Determining and allocating your budget for the year can feel daunting. We understand! We live in the same world, which means we get that budgets are unavoidable, and that sticking to them is extremely important.
If you’re even the slightest bit concerned about the effectiveness or efficiency of your marketing budget, seek help from an industry expert (that’s what we’re here for!). Whether you know a marketer personally or seek out a full-service agency like Asen, going the extra mile to ensure your budget brings the highest possible return on your investment is a wise choice.
Helping our partners thrive moving forward.
Here’s the thing about marketing partners… they’re just that— partners. A good partner serves as an extension of your internal team. They should be respectful, open and honest, and collaborative when it comes to campaigns and projects. In general, they’re there to look out for your best interest and help make your days a little bit easier.
At Asen, our goal is to make sure you’re making the best decisions possible for you, your team, and your brand. In doing so, we work backwards within set budgets by prioritizing marketing efforts that will bring you the most return, the fastest.
Though we provide “perfect world” scenarios for our partners’ budgets and calendars, we also understand that it takes time to grow a brand. For the best interest of your business, we’re happy to work within a budget that’s feasible for you at the moment.
From there, we’ll come up with a timeline, delegate projects based on both of our teams’ unique skills, and take you to market… so you can reach new heights!