Setting a marketing budget is tricky. How much a business allocates to marketing and which channels it invests in depends on various factors, including the growth expectations, industry, business stage, and business model (e.g., B2B vs. B2C).
Before allocating marketing funds, it’s important to understand the current state of the marketing foundation and strategy. For instance, is marketing well aligned with business objectives? Has the team used data in the past to determine where to invest or divest?
We invited three of Authentic’s fractional CMOs, Sherry Rothenberg, Tracy Steeno, and Eric Wanta, to weigh in on how a business should think about its marketing budget based on the maturity of its marketing teams and programs.
- What are the most important factors an early-stage company should consider when creating a marketing budget?
Eric: The challenge that most early-stage companies have is to generate results quickly while working with very limited resources. That means working not only with tiny budgets but also with small in-house teams. As a result, focus is key. The marketing budget should identify a few key efforts so the team can concentrate on doing those well. They should be either strategically important or directly tied to driving revenue. Resist the temptation to budget money for things you won’t be able to execute properly.
Sherry: Early-stage companies will need to decide how best to allocate their limited resources to achieve optimal impact. It is safe to assume you won’t be able to hire a marketing team that could execute in all areas of marketing. But no marketing will be effective if you don’t have an identity/brand, don’t know your story/elevator pitch, can’t clearly articulate your competitive advantage, and don’t know who your target audience is or how to reach them.
In-house marketing team members will need to be able to set and create a plan to reach clear targets/KPIs. They will likely also need to be able to juggle and execute multiple projects and outside resources across a variety of marketing functions (social, digital, content, events, branding, PR, etc). Having the right people in place to achieve all the above while establishing brand position and creating a scalable structure is crucial.
Tracy: Invest in branding to establish a unique identity and voice for your business so that your addressable market connects with your company and what it represents. Your brand must generate buzz to get noticed and break through the clutter. Branding lays the foundation for all your marketing efforts, so don’t make the mistake of dismissing its importance. When your go-to-market strategy and brand are in place, turn your focus to demand and revenue generation activities. To execute these activities, hire adaptable people or agencies with a track record of delivering results.
- How do you recommend a business with some marketing pieces in place (e.g., a marketing coordinator, digital ad spend, events) refresh its marketing budget?
Tracy: First, evaluate how the current marketing plan aligns with and delivers on the business objectives. Assess channel performance metrics and ROI, including what’s working and, equally as important, what’s not working. Identify the gaps or opportunities, including where you should invest more resources, what to reprioritize or remove altogether, and how to improve implementation. Strong implementation requires the right people, processes, software, and tools. Keep your marketing plan fresh by staying agile to address the changing landscape and avoid being locked into what you’ve always done.
Eric: Keeping your marketing budget fresh should not be a one-time effort but a collective mindset that drives your team to always look for new ways to improve performance. Whether that be optimizing current programs or trying new things. Encourage a culture that values curiosity and experimentation. That means looking outward for ideas and inspiration and not being afraid to try new tools and technologies. Perform interesting, new analyses to see what previously undiscovered insights might be lurking in your data. Question everything. Don’t just report results but continually ask why. Dig deeper to understand root causes and identify new opportunities. If your budget only funds what you’ve always done, you’ll never find the things that work better.
Sherry: This is more of a mindset or way of being than a one-time effort. First, be clear and realistic about your objectives and match those goals to your budget. If you want to gain market share, you’ll need a more aggressive budget than if you’re just looking to maintain your current level of business. If you’re looking to improve customer experience, identify the activities that will impact this outcome and how to measure success. Dig into the results of your marketing activities and tie your efforts to specific outcomes. Question, plan, test, adjust, adapt, and amplify.
- How do mature businesses with established marketing teams and programs shape a marketing budget that continues to drive growth for the business?
Sherry: In an early-stage company, you’re likely either focusing your budget on limited marketing activities or delving shallowly into several marketing efforts. In either case, as your business grows, you’ll be able to increase both the variety and extent of your marketing activities. Instead of generalists, established marketing teams will include experienced experts who continually evolve within their discipline. Since the healthy marketing framework has already been established (planning, KPIs, testing, adapting, etc.), it should be possible to evaluate activities, their effectiveness, and the return on investment and effort. In terms of marketing activities, eliminate the underperformers, improve the effective performers, and amplify the best performers.
Eric: As companies mature, they tend to have larger marketing budgets that can fund more and more programs. Businesses sometimes keep adding new things to their budgets without taking anything away. This can result in bloated budgets weighed down by spending on underutilized or underperforming programs that are not being actively managed or optimized and are not delivering the results they used to. Established marketing teams can drive growth by continually reassessing every activity as if they were funding them for the first time. Eliminating underperforming activities can be a great way to fund new growth initiatives by simply reallocating portions of your existing budget.
Tracy: Marketing teams and programs exist to drive business growth. Businesses don’t remain stagnant, nor should marketing. Marketing’s job is to continually fine-tune, test, and optimize programs to generate greater results. Markets change, new products and services are introduced, and business objectives evolve.
New and evolving marketing tools and methods are also being introduced almost daily, and channel rules frequently change (e.g., Google Algorithms). Be sure to invest in marketing education so your team stays at the top of its game. Invest in what’s delivering the most ROI while allocating funds for new programs and tests.
How well established and effective your current marketing programs are should factor into how you set and allocate your marketing budget. Authentic’s fractional CMOs have supported businesses of all sizes, types, and stages. Let’s connect if you’d like to discuss how an experienced strategic marketer can help your company set a marketing budget that elevates your brand, supports sales, and drives revenue.