Did you know that only about 24% of chief marketing officers admit to having sufficient budget to execute their KPIs? Generally, small businesses spend between 7-8% of their total budget on marketing, while the huge ones go as high as 10%. (1) (2)

Given the reality that your budget will almost always be minimal, you’ve got to know the right way to plan these funds so you can still hit your marketing goals. This article will take you through key things to keep in mind during the financial planning phase to create a successful marketing budget plan.

Define Your Goals

Start by asking yourself: What do I want to achieve? Is it more website traffic, increased sales, or perhaps more social media followers? For example, if your goal is to boost sales, you might focus on campaigns that drive conversions. This could mean investing in targeted ads or email marketing.

Say you run a small bakery. Your goal might be to increase traffic by 20% over the next three months. You could plan a local advertising campaign or offer promotions to attract customers.

Remember, your goals should be SMART: Specific, Measurable, Achievable, Relevant, and Time-bound. This clarity opens the door to budget effectiveness.

Understand Your Audience

While about 42% of marketers admit to knowing their target audience’s demographics, less than half know them deeply enough to tell their hobbies and interests. This can be concerning, given that knowing your audience allows you to tailor your marketing planning to their preferences. (3)

To get this right, create buyer personas. These are fictional representations of your ideal customers. Include details like age, interests, and buying habits.

For instance, if you’re targeting young professionals, consider where they spend their time online. Are they on Instagram or LinkedIn? This insight helps you choose the right platforms for your marketing strategy.

Make good use of software like Customer Relationship Management (CRM) systems, too, or any other tech that can help you build a deeper relationship with your audience. These tools allow you to track customer interactions and preferences and foster a deeper connection.

However, as you make these tech tools work for you, you’ve got to remain vigilant about cybersecurity threats that are pretty common in businesses like yours. So, put measures in place to protect customer data; this not only builds trust but also ensures that your marketing efforts aren’t undermined by potential security breaches.

Analyze Past Performance

Start by reviewing your past campaigns. What worked well? What didn’t? This analysis helps you identify patterns and trends. For example, if you run a social media campaign last year, check the engagement rates. Did certain posts get more likes or shares? This insight can guide your future content.

You can also use tools like Google Analytics or social media insights to gather data. Focus on metrics like conversion rates, click-through rates, and return on investment (ROI). Making sense of what has worked in the past can help you make informed decisions. This approach also helps you avoid repeating mistakes and maximizes your budget’s effectiveness.

Allocate by Channel

Different channels serve different purposes. For instance, social media is great for brand awareness, while email marketing is effective for nurturing leads.

Say you’re promoting a new product. You might decide to spend 40% of your budget on social media ads, 30% on email marketing, and 30% on influencer partnerships.

This balanced approach ensures you reach your audience where they are most active. It also allows you to test different channels and see what yields the best results. But don’t forget to monitor the performance of each channel regularly. If one channel is underperforming, adjust or reallocate funds to a more effective one.

Include All Costs

List all the elements involved in your marketing efforts. This includes advertising costs, software subscriptions, and personnel expenses. For example, if you’re running a digital ad campaign, factor in costs for graphic design, copywriting, and the ad spend itself.

Keep the hidden costs in mind, too. These can include things like taxes, shipping for promotional materials, or even unexpected fees. Getting both ends of this planning process right can help you come up with a more accurate marketing budget.

Monitor and Adjust

Set up regular budget tracking check-ins to review your campaign metrics. Look at key performance indicators (KPIs) like engagement rates, conversion rates, and overall ROI.

For instance, if you notice that a particular ad isn’t performing well, tweak it. You might also need to change the visuals, adjust the targeting, or even reallocate funds to a different campaign.

Remain flexible and responsive to the direction the data is sending you in and make budget adjustments. This way, you’ll get to optimize your spending and maximize your results.

Consider Seasonal Trends

Identify key seasons or events relevant to your industry. For example, retailers often see spikes in sales during the holiday season. If you run a travel agency, summer might be your peak season. You can make budget adjustments to allocate more budget to marketing during that time to capture potential customers.

Use historical data to guide your decisions, too. Look at past performance during specific seasons to understand what worked and what didn’t. Keeping these seasonal trends, you can optimize your budget allocation, ensuring you’re ready to capitalize on peak times and maximize your marketing impact.

Set Aside a Contingency Fund

Set aside a portion of your budget—typically around 10%—for unforeseen expenses. This could be a sudden opportunity to sponsor a local event or an unexpected increase in ad costs.

For example, if a popular influencer offers to promote your product, you’ll want to have funds available to seize that opportunity. But that’s not the only contingency.

Say you’re running a campaign, and halfway through, you discover a new marketing tool that could enhance your efforts. Having a contingency fund allows you to invest in that tool without derailing your budget.

Being prepared for the unexpected can make a significant difference. It allows you to be agile and responsive in a fast-paced marketing environment.

Closing Thoughts

Effective marketing budget allocation is all about clarity and flexibility. Following the tips shared in this guide can put you in the right place to make informed decisions.

Remember, budget management is not a set-it-and-forget-it process. So, keep monitoring and adjusting your budget to stay on track to meet your goals.