7 tips to optimise your marketing budget

Peter Desmyttere
October 24, 2018
⏱ 10 min. read

A professional marketing budget is very important. For various reasons. One is undoubtedly reporting to the management. After all, marketing managers cannot afford to be speechless when discussing the budget with the management. Another reason to budget: better insight into historical, current or future projects and campaigns. Those who don’t budget are like a captain who sails blindly. But also think of ROI (Return On Investment) discussions.

How can you win a discussion if you have no insight into budgets and costs? Don't let managers or directors who are juggling your budget unnecessarily or without any prior knowledge get you. Take control and refute their actions with a professional marketing budget that leaves no room for discussion. In this article, I give you 7 tips to turn your marketing budget into a piece of art full of marketing data.

Tip 1. Don't trust too much on repetition or your guts

"Regarding the marketing budget for the following year, I propose to repeat this year's budget." Is that your motivation to justify your budget? Weak. The first 'data-driven' manager, director, CFO or CEO grounds you into the dust in no time. Even worse is the statement "I think we will make it with €125,000 (example) next year". The manager from before carries you straight to the stake.

Act like a professional and base your marketing budget on one of these motives:

  • "Within our industry, 15% of the revenue (example) is used as a benchmark to determine the marketing budget - we cannot do less if we want to beat our main competitors."
  • "I propose to take a percentage of the turnover as a guideline for the marketing budget - as a marketer I contribute to the growth of the company, if the company grows I would like to reap the benefits of that - and vice-versa, I also respect the savings if the company would do less well in terms of turnover."
  • "I want to base my marketing budget on the company's most important commercial challenges - if ambitious goals are set within business units or product lines, I want a marketing budget that meets those ambitions."
  • "I want a 'free and unlimited' budget - but... for each budget question, I'll present what I'm proposing in return for ROI, based on proven results."

Admit it: the last one is daring. 'Performance-based budgeting' is not that common. But it exists!

The other 3 propositions are common among marketers with professional budgeting experience. I would advise you to analyse these thoroughly for your specific situation.

By the way, did you know that an average marketing budget amounts to 10% of the turnover? Since 2008, the American research institute CMO Valley has been conducting research every year into (among other things) marketing budgets. B2B companies tend to spend on average 8% of their turnover on marketing, while this is 12% for B2C.

Tip 2. Don't trust industry averages

There you are, with the CMO Valley report in hand. As a marketer in a startup, in a growth company or in a company that markets SaaS software, a marketing budget of 10% of the turnover is nothing. There are many exceptions to the rule. Are you responsible of the marketing for a start-up, are you launching a new product on the market, do you have to shape the entry into a new market, do you work for a growth company with ambitious growth plans or are you active as a marketer in the software or technology sector where speed-to-market and hyper-growth are needed to make a difference? You will have to aim higher.

A startup marketer will have to budget in function of objectives. With about €20.000 marketing budget you might not have a chance when launching software. A marketer in a growth company will have to be smart. The budget should be in line with the growth objectives. The marketing budgets of major strong brands are easy to find and quite transparent. For example, the marketing automation specialist Marketo spent no less than 66% of its turnover on marketing in 2017. For the market leader in CRM, Salesforce, this is 50%. And technology companies like IBM, Microsoft or Apple spend 21%, 23% and 30% of their turnover on marketing respectively.

Tip 3. Spend at least one third of your budget on digital marketing

I don't need to convince you that the modern consumer is mainly to be found online, do I? There are hundreds of charts and studies on this subject. So the shift from offline to online is in full swing. Hey, we wrote an interesting article about this earlier! In that article, we referred to the Data & Marketing Association, which has more than 100,000 data-driven marketers in its ranks worldwide.

Digital marketing is 'terribly' measurable. It fits perfectly into the picture of budgeting, cost management and ROI calculations. Nothing is easier to ask for than more budget for digital marketing based on proven results.

Still, the high figure for offline marketing stands out. With two thirds of marketing expenditures, we can hardly say that offline marketing is dead. The abundance of trade shows, events, experience marketing campaigns, in-store/outdoor advertising or PR campaigns compensates for the decline in traditional advertising.

Tip 4. Budgeting on macro, meso and micro level

Quite a few marketing budgets are stuck at a macro level. "I have a budget of x euro for marketing", period. Nice, but then show me how and why you are going to distribute that marketing budget. That's called the meso level: you divide your macro budget into sub-budgets that follow the logic of your project or campaign structure. Your website receives a budget, just like every campaign or your entire social media policy (owned, paid and earned communication).

The chart above nicely shows the structure according to the macro-meso-micro principle.

You start from a global marketing budget (the macro budget) that you divide according to the methodology in which your marketing plan is divided into projects and campaigns. This is useful for allocating costs to each project or campaign at a later stage. When the budget is then compared to the actual costs, you gain insight that helps to make important decisions in function of new budgeting. Maybe you overestimate the costs for certain fairs, or underestimate the cost of advertising campaigns via social ads? Budgeting at project or campaign level makes you much wiser.

Another advantage of project or campaign budgeting is the link to ROI (Return On Investment). Developing dashboards in which your budget, costs and revenues are compared to each other isn't magic anymore. And you immediately have the ideal instrument to teach your management what works and what doesn't. So they get their hands off budgets that offer results.

Finally: professional marketers even budget down to the micro level. Within a project (an event in the example below), the budget is allocated and measured at the level of each channel or cost item. This may sound a bit overwhelming, but once you're in this routine, you won't let it go.

Case study - project budgeting without expected costs

Tip 5. Visualise your estimated costs

Is your budget ready? Awesome! You can now enter the new budget year with peace of mind. But beware! Your eligible budget will go down very quickly. Why? You sign contracts with the media, you approve the offer for a new website, you take on the commitment to be present at 5 fairs or the marketing agency has been able to convince you to work on a completely new corporate identity. Although no invoices are received yet, all of this will decrease your budget. Therefore, it is quite likely that at the end of January 60% of your marketing budget has already been 'promised'.

Verwachte kosten
Practical example, where the estimated costs are higher than the actual invoices.

Above you get an example from our marketing planner Husky in which this effect is nicely illustrated. In the bar chart, the purple column represents the entire marketing budget. The green column next to it shows the status of the available budget or the sum of all promised budgets. In this example, there is hardly any budget to commit, so this is probably a snapshot towards the end of the year.

In professional budgeting, this is not only on a macro level but also on a meso to micro level. In the example of the event above, to the right of each project and project group, next to the budget column, an 'Estimated' column stands for the granted budget. There can be exceptional deviations in the budgeting of projects and campaigns throughout the year. Just think of a social ads campaign that generates more clicks and costs, or an exhibition participation that, due to a special deal, suddenly results in only half the cost for the stand.

Tip 6. Book your actual costs with the same logic in mind

Scroll back up to the picture with the 3 bar charts. The third or right chart represents the costs made or the sum of all approved invoices. In professional budgeting you do this at a macro level (how many invoices have I approved within the complete marketing plan), at a meso level (invoicing within a project level) and at a micro level (actual costs at the level of a channel or cost item). In our marketing planner, we keep the budget, allocated budget and costs neatly together. Because that's how it should be. If you work with Excel or with another budget planner, make sure to check if (and how) you keep track of the invoices according to the same logic and structure.

In practice, however, I see what the scheme below shows: an extensive Excel sheet with budgets and (sometimes) allocated costs. The status of the invoicing is left to the accounting department. Invoices are received digitally, approved and forwarded for payment. But.... there is no trace of this in the marketing budgeting. And that is a shame. Because accounting can provide you with a nice overview of costs incurred, but it is built according to accounting logic (what did you expect?).

Above: Excel according to marketing, with a separate row for Budget (B) and Reality (R).
Below: A Finance Report according to accounting.

The solution: develop a method for booking the invoices you approve according to a marketing budget logic. This can be done with codes, for example. Then the accounting department draws up a list that you can read and analyse. Another option is to book the invoices, after approval in your own marketing budgeting, neatly within the right project and according to a certain cost logic. That takes some time but offers the bonus that you're really looking for the right figures. At any time. If you have a lot of invoices, look out for an application that can book multiple invoices at the same time (a quick input module).

Another problem in the relationship with accounting is combi invoices, such as an invoice from Google or Facebook. This contains costs that relate to multiple projects or campaigns. In this case, you are forced to do the untying per project or campaign yourself.

Tip 7. Link to ROI (Return on Investment)

A marketing budget is unavoidably linked to results or ROI. You budget marketing, you create costs within projects and campaigns to achieve results. The management may still want to convince you with figures that not only save costs but are translated into results. "Thanks to the increase in the marketing budget for online ads, I have been able to increase the number of leads via the website by 20%" or "Our investment in retargeting has led to a doubling of the content downloads" sounds incredibly professional in your evaluation interview, doesn't it?

Start off with a simple ROI approach. For example, compare your total marketing budget with the number of leads you have made. Within a project or campaign, compare the marketing investment with the actual number of deals the campaign has generated.

A simple ROI approach: you compare the investment in marketing with the return in the number of leads. This allows you to quickly calculate the cost per lead.
 Another simple ROI approach: the investment in a campaign is compared to the return. This is how you calculate the return per deal.

For those who really want to go the extra mile in ROI analyses: you can create the most exotic combinations between budget and results. But that takes time, of course. Don't exaggerate, because marketing is still largely ungraspable for data analysts. After all, not every marketing cost can be allocated to a specific result.

Would you like to optimize your marketing budget? Then start a free 30-day trial with our marketing planner Husky. You can quickly get started with allocating budgets to projects and/or campaigns, assigning costs and placing every approved invoice within the right project. Finally, Husky includes a result or KPI dashboard, so the link to ROI is made instantly.

 

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