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Your guide to calculating and managing an effective marketing budget.
Your marketing budget is your key to meeting your marketing goals, keeping expenditure under control, and measuring your returns so you benefit from further investment in the future. It outlines all the money your marketing team plans to spend on projects over a set period of time and it helps you stay on top of costs and ahead of the game.
Your marketing budget tends to be broken up over every quarter and aligned with an annual marketing budget that helps you to retain visibility into spend and manage financial expectations over both the long and the short term. It can include a number of different factors that range from advertising to hiring new people to investing into technology to large projects or campaigns.
In addition, your marketing budget should also be calculated based on intelligent data that helps you to better choose the right agency and expenditure based on visibility into industry costs and standards. You can extend your budget further and achieve far more if you align your spend expectations with current costs and agency fees.
What to consider when calculating a marketing budget
In addition to the factors outlined above, there are several other key elements to consider when developing your budgets:
Past performance
Before embarking on a new campaign or annual spend analysis, it’s worth unpacking precisely how well previous campaigns have worked and the results that they’ve delivered. Understanding past performance and what’s worked well and what’s produced results (or not) will help you to refine your expenditure and planning.
The same applies to agency performance. It’s worth using benchmarks that are developed using extensive industry data to assess how well marketing spend is working for you across different campaigns and agencies. This includes metrics such as: were campaigns on brand and on brief; did the scope of work align with costs and results; how did the work compare with other brands in the same space;
Agency costs and deliverables
Agency costs vary dependent on industry, country, market and sector. These costs are also affected by multiple other variables that can influence budgets and spend. It’s important to use industry-relevant benchmarks and standards to assess the cost of an agency against other agencies that operate in the same markets and on similar campaigns.
Benchmarking tools that leverage relevant and high-quality industry data can help you to track elements such a scope of work versus industry standards and better negotiate agency fees for specific projects or retainers. Using reliable benchmarks, you can see what you should be paying for similar work and you can compare your marketing costs with other companies in the same industry to see how your expectations and expenditures compare.
Return on Investment (ROI)
When you scrutinise your marketing costs, there will always be room for improvement. You can make some top line savings, you can make more detailed savings, and you can determine these by assessing spend versus your ROI and by using industry standard benchmarks. As a critical part of any successful marketing campaign, ROI has to be assessed against the right metrics and these have to be developed using intelligent insights and data.
Often, brands measure ROI based on standard or customised metrics that have been developed using the guidelines provided by the ANA, but, while relevant in some instances, don’t fully realise all the nuances of a campaign. You need to use technology that allows you to track investments and costs using unique data and insights that will empower your brand and help you to develop a marketing budget that’s relevant in terms of cost and expectations.
The right level of spend
As you dig into the metrics and the data, there is one question that you should be asking – what is the right level of spend? How do you know what’s adequate for your business objectives? What’s competitive?
Answering these questions ties back to having access to data that offers you visibility into agency costs across multiple markets and campaigns, and that embed transparency into every agency interaction. RightSpend covers 75 markets and 10 different agency disciplines with our data and so we can provide you with comprehensive visibility into what other brands are paying for similar campaigns in the same markets, and we help you tangibly save money. If you’re a global brand, having access to this level of rich data can help you to completely refine your marketing budgets and save millions that can then be funnelled back into marketing and other campaigns.
RightSpend helps marketing teams look right into the heart of the system so they can run analyses and scrutinise their marketing costs.
What is a marketing budget?
A marketing budget is a strategic plan that helps you to manage your marketing costs, your expected marketing expenditure, and your financial requirements for marketing over a specific period of time. This can be annual or quarterly and includes numerous expenses that range from agency fees to advertising costs and more.
How do you calculate a marketing budget?
There are several metrics and calculations that are used as best practice across the industry but a recent CMO Survey found that most organisations spend between 10-13% of their total company budget on marketing.
Why do I need a marketing budget?
A clearly defined financial plan will help you to spend marketing money more effectively and ensure that your spend delivers the best possible ROI. It’s vital that you track and monitor your marketing spend to ensure you’re getting the most from it. Using marketing benchmarking tools to ensure that your marketing spend is working efficiently for you.