David FletcherEditors Note: I’d like to welcome David Fletcher as a contributor to The Demand Creator Blog. David heads up Imagine’s implementation efforts and has tremendous experience in both leading and guiding businesses. He’ll be sharing thoughts relevant to executives charged with revenue growth.
There is no "one size fits all" approach to setting a marketing budget. If you're not quite sure what your budget should look like and you look at some of your competitors for inspiration, you'll likely only wind up more confused than you were in the first place. Marketing budgets are determined by a wide variety of factors, including the audience you're trying to reach, the channels that you're using, existing relationships and more.
Instead of looking to those competitors and focusing on how much money they're spending, you should instead be looking at "how" and more importantly "why" they're spending money for guidance. Understanding the desired result is the most important factor to be considered. A clear picture of your desired result will help you better understand how much budget should be allocated to your marketing efforts.
To understand just how important marketing budgets have become, you only need to take a closer look at the industry as a whole. In The CMO Survey, published in February 2014, it was predicted that marketing budgets would increase 6.7% over the next twelve months alone. Not only are the numbers themselves increasing, but that trend is on the rise as well - marketing budgets only increased 4.3% in 2013 and were at a 0.5% climb in 2009.
There are a large number of factors that you should consider when you set a marketing budget for your organization. The first thing that you'll always need to do is define your objectives. This can serve as a road map regarding exactly what it is you hope to accomplish with the campaign in general. Part of those objectives will be figuring out whose attention you want to attract. If you're going after a younger audience, for example, a heavy emphasis on social media will be a must.
The Zero Moment of Truth (ZMOT) has not only changed the way people buy, it’s changed to role marketing must play in generating revenue. Would it surprise you that over 80% of the buyers decision is already made before they get to your sales reps? Or that over 84% of buyers now say they are looking at product reviews before making a purchase? Or that 79% of buyers use a smartphone to research the products and services before they buy?
This means marketing must take on roles and responsibilities that used to be managed by your sales efforts. Focusing on the ZMOT is more important than ever and without proper funding and/or execution, the only guarantee I can give you is lost sales.
With that clarity, the next are you'll need to pay close attention to is the return on investment. You’ll want to be sure that those marketing dollars are actually paying off in the way that you expect them to. I hear it from business owners and executives all the time that don’t understand inbound marketing, “What will the ROI look like? How do I know if I have enough budgeted?”
The answer, unfortunately, is never as simple as you’d like. There are two important concepts you must keep in mind when assessing ROI:
- You cannot use new sales or revenue as a measurement out of the gate when measuring marketing. Marketing’s job is to create more, better sales qualified leads (SQLs). It is not unusual that improving your marketing efforts highlights meaningful deficiencies in your sales process (or people).
- You must view ROI more as a process than an event. To achieve a predictable, sustainable growth curve, you must “fill your funnel.” So the way you measure ROI in 3 months will be different than how you measure it in 6, and diferrent still in 12-18 months.
This is another reason marketing tools and platforms like HubSpot are so important. They not only allow you to exectuve far more effectively, they allow you to “close the loop” and accurately assess performance and ROI..
There’s not a business owner or executive in the market today that wants to over fund their marketing budgets…obviously! That would be a considered a crime and horrible use of a company’s capital resources. Now, compare that to underfunding your company’s marketing budget…this would unequivocally be far worse than any possible budgeting surplus!
