5 Reasons Your Marketing Budget Will Be Wrong
Successful marketing begins with a rock-solid strategy. Your company’s goals, how might you achieve them, your marketing plan, creative and – of course – finances are all essential elements. But whether you’re planning for the 12 months ahead or implementing shorter projects throughout the year, even the best-laid plans will fall short without a well-considered budget.
Setting the right marketing budget can be a minefield. Sharing notes with our Liberti group partner, The FD Centre, we’ve compiled a list of five budgeting pitfalls to avoid at all costs.
Budgeting error #1:
The budget isn’t closely linked to marketing or business goals
All too often, marketing budgets are calculated as a percentage of the previous year’s sales or profits. Using this method alone tends to create a ‘how can we use this?’ mindset, rather than one focused on ROI.
Instead, the marketing plan should always come first and be directly tied to your company’s business goals. From there, your proposed budget should offer a clear explanation of the sums that will be spent on marketing activities, ideally with some mention of the projected ROI. It is then up to the company’s financiers to determine if your proposed budget can be met, or if marketing plans need to be scaled. Either way, you will be entering a budget period with a firm plan of attack, and knowledge of the resources available to you.
Budgeting error #2:
Companies don’t audit or truly learn from past successes (or mistakes)
It’s difficult to plan where you’re going next if you don’t already know where you are. As such, an effective marketing strategy begins with a clear understanding of the right now.
A good start is revising what went well in the past year, as well as what didn’t. Hopefully, you’ve got analytics that clearly demonstrate your marketing efforts’ ROI. Be sure to take a wider look at your company, too. Where is your brand positioned, how does it compare to competitors, and what are the current market conditions? Finally, a SWOT analysis of past marketing activities should give you a firm understanding of where budget should be spent in the upcoming period.
Budgeting error #3:
Running to shiny new marketing trends over proven options
Almost every company is guilty of having its head turned by exciting new platforms and opportunities. Do you remember Ping, Apple’s short-lived music social network? Or Tout, the much trumpeted micro-vlogging app? You’d be forgiven for having forgotten the sites, or even never having heard of them, but that didn’t stop major brands allocating significant budget to marketing on the fledgling platforms.
It’s easy to be swept up in hype and think, “we need to get in on this”. Nobody wants to be left behind in a field as fast-paced as marketing. But if your current platforms and strategies are already working, that’s likely where your budget should be allocated. Besides, it’s usually better to be on the second wave of a trend, once it’s a known quantity, than to risk early adoption.
Budgeting error #4:
The budget doesn’t include a long-term branding element
Smarketing; community-making; guerillas; affiliates. Every year brings about new fashions in marketing. But really, marketing comes in two timeless flavours.
The first is sales activation, which is designed to make customers act in a particular way; for instance, to sign up for a newsletter or purchase a product. The ROI of this kind of marketing is simple to measure and, as such, easier to budget for.
Then there’s brand marketing, which concerns itself with raising awareness or equity in your company. This can be a tougher sell, as the benefits are both long-term and backseat. Brand marketing requires constant investment, creativity and doesn't provide direct sales data. However, without it, a brand can fade into obscurity or be eclipsed by competitors before realising it’s even happened.
There’s a reason why world-leading brands such as Nike still sponsor small local events. And it’s not to sell a few t-shirts. So, think long-term and ensure your budget includes resource for ongoing brand marketing.
Budgeting error #5:
Preparing your budget the wrong way
With these pitfalls in mind, let’s look at how you can prepare your marketing budget the right way. Start with your marketing plan. Is it realistic, does it build on last year, does it focus on both short and long-term goals, and is there enough flexibility to cover unforeseen challenges? Only when the answer to all these questions is a resounding ‘yes’ should you begin attributing budget to each marketing activity.
Next, ensure that your budget includes both metrics – measurable marketing goals connected to ROI – and a list of who is responsible for each activity and their outcomes. Also name the platforms, tools and marketing actions that be will be used to reach your goals – as well as how you’ll monitor progress.
Finally, a budget shouldn’t simply be a number handed to accounts, nor a spreadsheet circulated around departments. The budget is a reflection of the wider marketing strategy, which requires buy-in from the heads of all departments to be effective. In this way, a budget document should be the conclusion to a longer conversation, and one that you’ve sold to your company. After all, this is marketing.
Want to get the maximum value from your marketing? Listen to our Return on Marketing Investment webinar, here.