The Importance Of A Marketing Budget & Why You Need One
Marketing can drive your business forward, attracting leads that turn into hard-earned profit. It can also be a leaky cauldron that causes an ungodly and expensive mess, which is why tightly controlling your marketing spend is so crucial.
In this article, we outline the importance of a marketing budget, covering six decisive reasons why you need one for your business. We also provide a quick overview of the budget’s general outline, and a strategy that encourages you to invest in profitable campaigns, so that your marketing is truly effective.
The importance of a marketing budget—6 reasons why you need one
Here’s some of the biggest reasons why you need a marketing budget for your business.
1. You can tie marketing to your business goals
If your priorities were in the form of a pyramid, your business goals would sit proudly at the top. They should inform every action and decision for your business all the way down the pyramid, including how you will market to customers. A marketing budget allows you to select the campaigns that will help you achieve each of your business goals, and keep track of progress along the way. This provides clear insight into how the business is performing.
2. You have control over spending
Every business owner or executive needs a clear understanding of where money is being spent. Without it, certain areas of the business may be quietly leaking cash, and if enough time passes, it could be disastrous.
A marketing budget outlines exactly how much you want to spend on your marketing campaigns, and tracks their performance over time. This provides a vivid and precise picture of what is happening in the marketing department.
3. It creates a clear-cut plan
It can be scary not having a plan, especially when you’re investing in money-hungry campaigns like advertising, which can quickly blow out. When every campaign is laid out before you, and you know exactly how you’re marketing for the year, anxiety is reduced to a whimper. You have control over what’s happening and can guide your marketing efforts to success.
4. You can invest more into profitable campaigns
When marketing is effective, it pays for itself and then some. Every dollar invested should generate a return, and by laying out a budget, you can see which campaigns are your highest performers, and increase their investment. Over time, your winners will become clearer and clearer, and as your profits soar, your marketing will become a true champion of your business.
5. You can drop unprofitable campaigns
Why keep investing in marketing campaigns that lose money? If you’ve given a campaign a fair run, and it’s still not generating a profit for you (or the profit is negligible) drop it like a bad habit.
6. You can experiment with supplementary campaigns
Supplementary campaigns are campaigns for which you can’t accurately measure profit. They include techniques like content marketing and social media marketing, which can definitely provide value to your business, but can’t be directly tied to financial outcomes. The campaigns that can be measured for profit are foundational, like advertising and SEO. When you have a well-made marketing budget, your most profitable foundational campaigns will reveal themselves, and you can use their profit to fund supplementary campaigns that provide value to other areas of the business, like brand awareness and customer loyalty.
What is included in a marketing budget?
So keeping a budget is critical for your business. But what is included in a marketing budget, exactly?
At Media Heroes, we use a technique called profit-focused marketing, which focuses your marketing efforts on the campaigns/methods that make you money. When using this technique, the marketing budget should tell you two basic things: which types of digital marketing campaigns you are going to run, and how profitable they are to your business. To achieve this, you need to fill out a table that looks something like this:
|Campaign||Method||Number of leads||Cost per lead||Budget needed||Months to mature||Average annual profit per lead ($100)||Customer lifetime value ($500)|
|Social marketing||Supplemental||n/a||unknown||$500||3||$0 assumed||$0 assumed|
|Content marketing||Supplemental||n/a||unknown||$500||3||$0 assumed||$0 assumed|
This marketing budget technique tells you the following:
- Which campaigns you are investing in
- Which campaigns are profitable (foundational), and which experimental (supplementary)
- How many expected leads you need for each campaign to produce a profit
- How much budget you need to invest for each campaign
- How long each campaign takes to mature
- How much total profit you can expect to see from each campaign
If you’d like to use this technique for your business, check out our article on How To Create A Marketing Budget That Generates Big Profits. It’s highly recommended.
Of course, this isn’t the whole picture because it doesn’t include one-off marketing costs like new websites (Core Web Vitals are just one reason for needing this), corporate gifts, and trade shows, or ongoing costs like marketing tools. You’ll need to create a separate table for those.
The importance of a marketing budget—summary
The importance of a marketing budget is clear: it provides you with a sturdy plan that focuses on profitable campaigns that you can invest heavily into. You’re flying blind without this crucial information, and you might find yourself crashing into something big and heavy. But with a marketing budget in place, you can move forward confidently and guide your business to success.