Marketing is one of key driving forces for any business. It helps give an edge in the industry which is growing increasing competitive. Unless your business is well marketed, it can never reach to the target audience and convey its core brand messages in a perfect way. But reaching out to your customers is not as cost-effective or affordable an option as you would believe. You must first set an effective annual marketing budget that your business may require to bring you the cutting-edge and competitiveness. While setting the budget, a business must look whether it does affect the core operations and sustainability in the long run.
Let’s look at four key factors that will help you determine how to set an effective annual marketing budget for your business –
1 – First, know your annual revenue
Well before setting an annual marketing budget, you first need to know what your annual revenue is going to be for the year. You can get a projection of earnings for the next 12 months and based on that, go about setting marketing budget. You can analyse the gross revenue figures of previous years and see how your business fared in the past.
With a rough estimation of the revenue for the year, you could decide the percentage to allocate to the marketing purposes. Only the revenue estimation could tell how much you have to work around for marketing. If the projection is better than last year, you might think of increasing the budget and vice versa. So, know your revenue and then take the call over marketing budget.
2 – Check the market standing of your business
How much you spend on marketing budget will also depend on the standing of the business in the market. How customers perceive you in the market, how you brand is received and how much respect your products or services command in the eyes of customers, all this also have a role in play in deciding you spend on annual marketing purposes. For that reason, the budget varies a lot for established brands and for start-ups.
If you’re an established brand, there will be less focus on investing a lot in building trust and winning customer confidence. So, such enterprises can afford to spend a lower percentage of their profits or revenue on marketing tasks. On the other hand, start-ups are yet to find a foothold in the market and thus they must devote a bigger share of their revenue for annual marketing budget.
3 – Set the percentage of revenue for marketing budget
Once you have decided the health and revenue of your business, you can easily go ahead with deciding on the percentage of gross revenue to be set aside for marketing endeavours. If you’re a brand new to the industry and looking to establish a footing in the market, you should then look to part with some 15 to 20 percent of your gross revenue on marketing.
If you’re already a trusted brand, you can then eye on spending between 5 to 10 percent of your gross revenue on marketing. And if you’re more aggressive in intent and ambition, and want to boost your reach in the market, you could up the percentage a bit more and realize your marketing goal. Even if your products and services are great, that does not mean you can slash down the marketing budget else it might affect your outreach strategy for future.
4 – Think for the future
You should never take marketing budget as a constraint on resources and rather assume them as a well-planned investment in future. It will be a hedge against uncertain future as you set aside a good amount from the profit for the growth and progression of the business. If you did not invest in marketing today, your business might not able to get a foothold in the market in future which you can least afford.
So, you should never take marketing budget as a liability on your business when it’s actually a boon for future. You can take a leaf out of any top event organisation which spends a lot in making the occasion a great success for the concerned parties. So, be positive with your marketing budget and script success for your business.
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