Nov 4, 2016
Below is a list of common methods used for setting a marketing budget. There are several different ways to go about creating a budget, some are more reliable than others. We suggest you dive further into the links provided to find out which one works best for your company. And remember, no matter what marketing budget you choose, it should always have proper tracking systems and controls in place so you can measure its effectiveness.
1.Percentage of Revenue – “According to a 2014 Gartner Research study, ‘companies spent on average 10.2% of their annual 2014 revenue on overall marketing, with 50% of companies planning to increase [in 2015] to an average of 10.4%.’ Ten percent — the magic number you will likely hear whenever you ask how much of your revenue you should spend on marketing.”
2.Match the Competition – “This is another simple way to set a budget, since maintaining costs comparable with competitors keeps the business in line with others in the field. However, this method also assumes the competitors are spending the right amount and have a comparable business. If you’re a mom-and-pop organization competing with Wal-Mart, obviously you couldn’t copying Wal-Mart’s marketing budget. When using this method, the revenue of a business should still be taken into account.”
3.Business History – “A detailed look at last years’ budgets versus the accomplished goals offers marketers a good idea of where they need to be in the year to come. If the management team is happy with the accomplishments then these budgets represent a solid starting point for next year. If major strategic changes are to be implemented then previous budgets might not be relevant. This is also the case for new companies (brands) with no marketing budget history.” (Brand UNIQ)
4.Task Based – “To use this method, a company must define the desired results of advertising and the strategies and tactics required to achieve these results. Additionally, the business must assess the costs associated with these strategies and tactics. If no financial restrictions exist, a company can build its marketing budget by examining each goal or objective and the tasks necessary to reach these objectives. A primary challenge associated with this method is the difficulty of accurately assessing the advertising costs necessary to accomplish the goals.” (Brian Bass, Chron)
5.Affordability – “…budgeting method based on what a firm’s owner, or marketing department, believes the firm can afford to spend on marketing. Since such budgets are not based on any definite objective, the firm may spend too little or too much relative to its needs.” (BusinessDictionary)