Most companies have a budget for operations, human resources, etc. So why not a marketing budget? Why should a company establish a marketing budget? Interestingly, having a marketing budget will actually save your money in the long run. For this issue of eTip, we interviewed marketing strategist Chris Bodmann on the matters of marketing budgets.
BMC: How long have you been in marketing and how did you get started?
Bodmann: I have been working in marketing for over 10 years. I got my start in retail brand identity and then moved into pharmaceutical marketing. Most recently, I’ve decided to turn my marketing knowledge into a force for good, founding White Knight, Marketing for Good (www.marketing-for-good.com) to help non-profits and corporate social responsibility programs benefit from cutting edge marketing practices.
BMC: Why should a company (large and small) formalize a marketing budget?
Bodmann: When money is tight, and in my experience money is always tight for clients, marketing expenditures are often the last consideration in the budget. This is because the “money people” don’t often see the value in the dollars the “marketing people” want to spend. Marketers, especially agencies, often fail to show the return on invesment (ROI) a wisely funded marketing program can bring. But especially when times are tight, and especially with the saturation of messages in the marketplace, marketing activities can be the difference between success and failure of a business. The trick is to be strategic with the dollars you spend – select media channels that make the most sense for your chosen goals. That starts with knowing where you want to take your brand and knowing how much money you have to spend. This is true whether you’re using internal resources or outsourcing to an agency.
BMC: What things should be a part of a marketing budget?
Bodmann: I think the first thing that should be considered in a marketing budget is an external partner. This could be an agency, a PR firm, or just a consultant. I think the external viewpoint is important, because it allows a perspective of the situation that is not mired in internal politics. It can be an unbiased viewpoint that provides a trusted advisory role to decision makers.
Next, it is important to leverage this external partner to help develop a marketing strategy. Looking at the business challenges for the coming year, a marketing strategist can assess where your brand exists in the world of the target audience, work with you to identify where you want the brand to be in a given time frame, then devise a marketing and communications strategy that takes your brand from where it is to where you want it to be. Most good agencies have someone or partner with someone who does strategic planning.
It is vitally important that, along with this strategy, you have a well-defined brand, and it may make sense to devote some dollars to assessing your branding and defining your identity. This means more than just having a name and a logo – see some of the other eTips for pointers on brand identity definition.
Don't skimp on the creative – the right message and image can place your brand firmly in the minds of the consumer. Consider devoting money to a photo shoot of some kind because people can always sense when an ad uses stock photography. And recognize that good creative is worth the extra pennies you pay for it.
Finally, consider paid media. It can be expensive, but a good media plan that is well funded ensures that your well-crafted message reaches the right audience at the right time with the right frequency. If you underfund this part of your marketing plan, all of your other hard work (and hard spent dollars) could go to waste.
BMC: What are the three most common mistakes you have seen companies make when it comes to their marketing budget?
Bodmann: 1. Not telling the agency what their budget will be. If you do decide to hire an agency, please please please tell them what their budget will be. It does neither of you any good to go through the exercise of the agency coming up with a guess for what you might be willing to spend. The number will either be so high that you get sticker shock, so low that it is going to be an un-optimized execution of your budget, or you will get a “good, better, best” proposal that does both. As I often tell clients, a $10,000 budget is very different from a $100,000 budget. By divulging your budget to the agency, you are going to get their best thinking and a plan that fits neatly within that budget. I guarantee you 99% of agencies want to create a partnership with you, and it is within your best interest as a client to help facilitate that partnership – because the more you let them in, the better work they will do for you. If you want to achieve your goals with an agency partner, being forthcoming about your strategy, budget, and goals are the best ways to accomplish that.
2. Not carving out specific money for paid media. So many clients I work with are more than willing to spend their money on strategy, creative, and even market research. But when it comes down to getting the messages into the marketplace, their purse strings tighten up. Paid media is expensive, but if you work with the right partners and media experts, you can maximize these dollars and even get a whole lot of freebies on top of what you pay for. And if you are interested in metrics, media folks worth their salt are a wealth of it. Doing it right, you can get your message to the people with whom it will resonate. And if you put enough money into paid media the message will actually be repeated enough times that the audience will remember it. Allocating enough dollars here is as important, as devising a marketing strategy in the first place. How much is enough? My rule of thumb is that 75% of the marketing budget you spend should be devoted to paid media and associated costs.
3. Underestimating the cost of marketing activities (and the corollary: social media is not free). I could sugar coat this for you, but that’s not the point here. To do it right, marketing costs money. How much money depends on what you are trying to accomplish. This could be between 2-10% of your total sales, as a general rule of thumb, but that depends greatly on the industry you are in. And during a product launch, that number could exceed 20% of (projected) sales. For a lot of my clients, there are no sales – I do marketing for a lot of non-profits that are selling ideas rather than products. This makes things even more difficult, but also makes marketing even more important. The point is – you have to spend money to make your message heard. Don’t underestimate that cost.
To tack on one more point here – social media marketing is NOT free. It costs money to strategize, write posts, and engage an audience. So many clients go into social media marketing activities without a sense of what it costs to succeed, and unfortunately doing it wrong could hurt your brand.
BMC: Last words of wisdom in regard to a company’s marketing budget
Bodmann: The formula I lay out is fairly simple. I’m recommending you A) define a budget for your marketing activities (somewhere between 2-10% of your total sales), B) hire a marketing partner to help you define where you want to take your brand and the best tactics to get you there (tactics being anything you are spending that budget on), C) define your brand identity, D) develop superior creative, and D) ensure that your creative gets seen with a robust paid media budget.
I won’t guarantee success with that formula, but it certainly puts you on the right path to success.
Chris Bodmann is a marketing strategist in San Antonio (email@example.com) who applies his knowledge of business, communications, and marketing principles to develop comprehensive and holistic marketing solutions. Over the past decade and a half, he has honed his marketing acumen and has worked professionally in nearly every discipline in the industry. Chris has worked with national and international clients including Whole Foods, CSL Behring, AARP, the USDA, and the Texas Department of Transportation.