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Any business with objective to satisfy a specific segment of market with an expected return on investment (ROI)will have to set up the necessary inputs in place in order to achieve set goals.
Marketing budget is an integral part of organizational strategy, which is a plan or line of action carefully designed to achieve a stated goal and objective. It is the estimated cost an organisation needs to promote its products or services. Any organization with a specified set goal should have a plan of action expressed in a quantitative terms with which organizational spending can be controlled and measured. Organization’s marketing budget should be strategic, tactical and objective. Some companies spend 50% of sales revenue on marketing, some spend 30%, 20%, 10%, and some do not have any budget for marketing.
The Benefit of Marketing Budget
- There are several benefits of setting up a separate budget for marketing: One of the benefits of marketing budget is to control marketing expenses and project revenues.
- A well designed marketing budget helps to eliminate waste and measures actions against goals.
- It also helps in the coordination of marketing activities of the organization.
- A realistic budget establishes a standard of performance for actions and communicates those standards to others responsible for implementing marketing strategy.
- A well-designed budget is also a tool to keep organization on target and indicate when there is a need for modification of marketing plan, especially if something goes right or wrong.
Steps to prepare a marketing budget
These are simple quantitative methods of expressing an expected expense of marketing activities to be performed in order to achieve and expected result within a specified period of time.
Below are the steps in preparing a marketing budget
- Segment Listing: Create a list of the different segments of your marketing efforts and how they can be tracked.
- Cost estimation: Estimate the costs involved in carrying out the marketing efforts and gathering market research about your target market and the cost of the different marketing strategies that will be used to reach out to them. Also included in the cost estimate is costs of carrying out promotional campaigns, adverts, TV and radio commercials, etc
- Tracking cost: Estimate the costs of tracking and monitoring your both the marketing and communications efforts. This include conducting a market survey or the use of reliable website statistics package.
- Sum up the total estimated costs (In steps 1-3). At this point, the management reviews the total estimated cost and the related components/categories; and then decide on whether it would be adopted or reviewed.
- Performance tracking: Come up with a spending formula that ties your marketing budget to a percentage of sales. This would let you know if your marketing plan is working. If it is working, then the more you sell with it, the more you should consider spending on your marketing efforts. However, if your sales drop, a spending plan tied to sales will put in a place a brake that will alert you to reexamine each aspect of your marketing plan is not working
For example, an organization may set a target of 1billion sales revenue and need to spend 100-300million on marketing though which must be based on objective budget formula. A well detailed and objective marketing budget will give explicit areas that need more attention or allocation of resources in order to realise organization’s 1billion set goal, though this must be based on the available data within internal and external environment.
A marketing budget should include all the costs that involve marketing such as public awareness (roadshow), advertising, creation of website, products promotion, public relations, branding, Social media marketing, Content marketing, salesmen salaries, distribution cost, new territory development and Events.
Although what determines the content of your marketing budget is your marketing plan which provide a road for your business.
