Setting an SME’s Marketing Budget can seem hard work and it explains why business owners often ask me: “What should our marketing budget be?” The answer is an irritating, “It depends on lots of things” so, in this post, I’m going to share what ‘it depends’ on. I’ll help you understand the main marketing budget lines you need to consider when setting your SME’s Marketing Budget.
I’m not going to give you a magic number or percentage that can be applied to all businesses at all times. What I am going to give you is an approach and method to apply to figure out what your business needs and what it can afford.
A marketing budget can cover a myriad of activities, salaries and resources, so you have to be clear about what your SME’s Marketing Budget consists of – and what it doesn’t. Let’s look at each area it could cover in turn.
As you work through these areas, you need to decide if the activities in them are going to covered under the term, ‘Marketing Budget’. Then you can allocate budget lines to each area.
1.Marketing, Sales and Account Management?
First, define what you mean by, ‘marketing’. Do you mean just marketing activities or those that are Sales and Account Management too?
I recommend using the Buyers’ Journey as the starting point for deciding what your SME’s Marketing Budget is going to pay for.
Using the Buyer’s Journey means you will take into account all the activities through from awareness to customer loyalty.
In bigger SMEs and Corporates, each stage might actually be managed by a different person / team and have its own budget.
You need to decide if you want to:
- group all the activities in the Buyer’s Journey as ‘marketing’ budget or
- break it down by the different stages or responsibility areas.
For my business, because it’s small, I group the budget spend for the whole Buyers’ Journey under ‘Marketing’. For some of my clients, we split it out more so they can see what they are spending at each stage of the Buyers’ Journey.
Choose the approach that works best for your business.
2.The four key areas of marketing that need money
Next, look at the four key areas of marketing that your business will need to spend money on.
These are typically:
a. Strategic Marketing: Reviews, planning and top line measuring.
b. Infrastructure: Building and maintaining marketing infrastructure – websites, marketing collateral, corporate brand.
c. Campaigns: Product / segment campaigns – specific time-bound campaigns to target segments selling specified products, helping them through the Buyers’ Journey.
d. Market positioning: consistently developing and producing marketing material that reinforces the brand position you wish to occupy. This would include general brochures, on-going PR, some social media aimed at building and maintaining your presence.
Depending on the size of your business, you may wish to allocate a separate budget line for each of these four areas.
One of my clients has split her SME’s Marketing budget into ‘Strategic Marketing’, ‘Infrastructure’ and ‘Campaigns’. She knows that she needs to spend a quarterly amount on planning her marketing with me; a weekly amount setting up and running her marketing campaigns; and she has a list of marketing projects, such as a new brochure, that she spends budget on throughout the year. The Campaigns budget is priority so, if her forecast income doesn’t materialise, the marketing infrastructure projects are put on hold.
3.Your marketing resource
Your marketing budget may include salaries for employed marketing people, marketing consultants and freelance marketers. Even if this comes out of a separate budget for employees / HR, I would recommend a line in here so you can see how much your marketing really costs you.
There is another crucial marketing resource that you have to budget for: time.
Unless you’re the Marketing Manager or Marketing Director, any time you are spending on marketing is time taking you out of the business.
The question is: is it worth it?
What do you charge your clients for an hour of your time? Or should you be focusing on growing and leading the business? Is it worth paying someone else to do the marketing pieces? Remember the cost saving only works if it takes less of your time in total.
Mo runs an IT firm. He writes weekly, ‘expert’ LinkedIn articles which are well received. However, it takes him 5 hours to write each article. His chargeable rate is £50 per hour. He is ‘spending’ £250 per week producing marketing copy.
He wants to outsource it but had a bad experience when he tried this before. By the time he found a copywriter, met them, chose them, briefed them, corrected their work, made amends, it took him almost 7 hours and he paid them £150. By the time he added in the cost of his time, he had paid £500 for one article!
It was suggested to him that he goes for a long term relationship with a copywriter. This was an investment approach and Mo would have to put time in upfront. He did the following:
- chose a recommended copywriter with experience in Technology writing, who suggested that Mo dictated his thoughts for each article, rather than write them down. This saved Mo at least 2 hours per article.
- arranged, at a discount, for the copywriter to be paid for and write an initial three articles, thus reducing the cost.
- updated his ideal customer segment profiles and the company’s brand positioning guidelines; he gave these to the copywriter so they really understood the audience they were writing for and the tone of voice and words to use.
Mo spent 12 hours setting all this up but at the end he had three great articles (which would have taken him 15 hours, or £750 of his time, to write) for £400. Investment cost so far was 12 x £50 = £600 + £400, so £1,000 for three articles instead of the cost of his time equating to £1,500 for three articles.
The next three articles only took four hours (£200) of input from him plus £400 for the copywriter, a total of £600 for three articles instead of the 15 hours and £750 in his time before for the same. He used the nine hours he had ‘got back’ to focus on developing his business’s growth strategy.
4. Knowing what to spend – what stage is your business at?
So, you now have your budget lines. But how do you know what to do spend on each area? This really depends on what stage your business is at, your current priorities, your clients and your available spend.
Is your business is at any of the following stages?
- Start up / new business
- Old business trying to revive itself
- Entering a new market or segment i.e. selling to a different group of people than previously
- Selling a new product / service / product line
- Trying to re-position yourself in the marketplace
- Time of huge growth.
If you answered, ‘yes’, then it will probably need to heavily invest in all four key areas of marketing: Strategic Marketing; Campaigns; Infrastructure; Market Positioning
For an established business that needs to maintain its current income levels with small levels of year on year growth, then your marketing spend might be more around:
- Ensuring your marketing is in place and working well at every stage of the Buyers’ Journey, with regular small tweaks and improvements (‘Campaigns’ budget)
- Updating or maintaining your current marketing infrastructure (‘Infrastructure’ budget).
So, understand where your business is to determine how much spend your marketing needs in each area.
5. Pulling it together
When we pull all this together, you can end up with a high level marketing budget. It’s easier to show you in a worked example.
For ease and simplicity I have chosen a small business with turnover of £150,000 p.a. who want to enter into a new market.
- Overview budget for: all aspects of Marketing, Sales and Account Management 2020 i.e the whole Buyer’s Journey
- Stage business is at: growth into new market to generate £15,000 new business
- Budget implication: Need to find additional spend to go into new market
- 2019 Budget: £9,000 + £1,000
- 2020 Budget: £15,000 + £2,000 worth of Director time
|Area||Budget||Key areas of spend|
|Strategic Marketing||£3,000||Develop and oversee Campaign Plan for new market|
|Infrastructure ||£6,000||- Develop new marketing collateral for this market [£2,000 for Graphic Design and £1,000 for Copywriting]|
- Refresh and post existing online collateral for other segments [£3,000 to Marketing Exec]
|Campaigns||£2,000||Campaign to new market – supporting them throughout the whole Buyers’ Journey|
|Market positioning||£4,000||Maintaining existing levels of networking, SEO (done by Marketing Exec), and 12 guest posts (written by copywriter) on other websites and publications so retain presence in existing market as, ‘Subject Matter Expert’.|
|Other Resource||[£1,000 |
|•Input into development of the Campaign Plan |
•Input into the new marketing collateral and guest posts
|Total Spend||£15,000 + £2,000|
Budget broken down by Team Member doing it:
- Strategic Marketing Consultant: £3,000
- Director time: £1,000
- Marketing Executive: £3,000
- Copywriter: £2,800
- Graphic Designer: £3,000
Budget allocated to going into new market:
- Strategic Marketing Consultant: £3,000
- Graphic Designer: £2,000
- Copywriter: £1,000
- Total: £6,000
Things of note in this example:
- The business knows that it has to significantly increase its marketing budget to successfully break into a new market
- This also means doubling the amount of time the Director spends working on marketing
- But this investment of £6,000 + £1,000 of time should give them £15,000 new business by the end of the year
- The biggest marketing cost is the Marketing Team because they are putting all of this into their Marketing Budget so they have a real sense of what their marketing is actually costing them.
There are many aspects to setting a Marketing Budget but ultimately you need to answer these two questions: what do you actually count as your marketing budget and where does your business actually need to spend this money? Then, you can systematically work through what you need to spend on each area of it and allocate the budget accordingly.
This blog post is by Kara Stanford, Strategic Marketing Consultant, based in Hampshire, UK.
If your business needs to set its marketing budget and you’d like help, then contact her.