The CMO's Guide to Growth: Top 5 Marketing Budget Hacks for 2024
As someone who has served as a Chief Marketing Officer for several years, I have observed numerous companies needing help determining an appropriate baseline marketing budget at every stage of their business. Regardless of the size of your business, it is imperative to have a well-crafted marketing budget plan that aligns with your revenue objectives and overall growth strategy.
A well-executed marketing plan can help you achieve your business goals and drive growth by enabling you to reach your target audience, build brand awareness, and generate leads. It is essential to invest in marketing activities that are tailored to your business needs and goals and that can help you stay ahead of the competition.
Key Takeaways
- Companies that spend more on marketing typically see more growth.
- The U.S. Small Business Administration recommends spending at least 7% of your gross revenue on marketing.
- Research your competitors to determine your ideal marketing budget by using tools like SEMrush and Wappalyer.
- There is no one-size-fits-all answer to determining your baseline marketing budget, looking at percentages, and determining growth goals.
- There is no one-size-fits-all answer to determining your baseline marketing budget, looking at percentages, and determining growth goals.
- Working with a marketing consultant can provide valuable insights you are not seeing and provide 3rd party perspective.
What is Your Baseline Budget? How to Answer the Old Vender Question
To determine a baseline marketing budget, you should calculate a percentage of your revenue. This can be done by analyzing your competitors and considering your goals and objectives. Working with a marketing consultant can provide valuable insight and experience to help you achieve growth. According to recent studies, companies that grew 1-15% year over year spent an average of 16.5% of their revenue on marketing. Companies that rose 16-30% year over year spent an average of 22% of their revenue on marketing. And companies that grew 31-100% year over year spent an average of 50.2% of their revenue on marketing. It's clear that companies that pay more on marketing typically see more growth.
Now, the million-dollar question is, how do you determine your magic number? While giant corporations may spend 50% or more on marketing, that can be different for your business. The U.S. Small Business Administration (SBA) recommends spending at least 7% of your gross revenue on marketing.
Here's an example to help illustrate how this works. If your business's gross annual revenue is $500,000, and you decide to invest 7% of that in your marketing budget, the total marketing budget for the year would be $35,000.
It's important to note that while the 7% guideline may be a good starting point, it may mean something other than the correct number for your business. There are several factors to consider, such as the industry you operate in, your growth goals, and your competition.
Ultimately, there is no one-size-fits-all answer to determining your baseline marketing budget. It requires careful planning and analysis of your business objectives, competition, and revenue targets. As a subject matter expert with dozens of successfully accepted budgets under my belt, I recommend working with a marketing consultant if you need help figuring out where to start. Marketing consultants can provide valuable insights and experience to elevate your marketing efforts and help you achieve your growth objectives.
How much should you budget for marketing in 2024?
The recommended marketing budget for brands varies depending on our revenue and growth targets. It depends; you’ve likely heard that from us marketers once or twice. Well, there is a reason. However, a general recommendation is to allocate about 12%-20% of our revenue towards marketing. The budget should lean toward the higher end of the range for a new brand with ambitious growth targets is in a highly competitive market or is creating a market. Meanwhile, well-established brands with lower growth ambitions can invest closer to the lower end of the range to “keep the lights on” or the “ship moving.”
If you want to grow your business next year, budget 12-18%
To keep growing your business, allocate 12-18% of your budget to marketing. Track your lead and revenue sources to determine which strategies work best. Diversify your marketing approach by combining direct mail with digital ads for 39% more attention.
If your business is experiencing a decline, increase your budget by 3-10%
During tough times, it's important to increase your marketing efforts. Consider increasing your marketing budget by at least 3%, but it would be even better to increase it by 10% or more. After six months, evaluate the impact of your increased spending. If you don't see any significant changes, review your tactics, but don't cut back on your budget too soon.
When the pandemic hit, the company I was working for experienced a significant drop in revenue, resulting in the closure of many of our doors and the loss of numerous employees. The marketing department, which used to consist of teams of people, was reduced to a small team of sole contributors who were responsible for keeping the lights on. Most of us weren’t even full time. The company is still in the process of recovering and trying to increase its market share, as they put themselves in an unrecoverable position once travel resumed. Now, they are struggling to regain easy bookings on what was once their market share in and industry that is growing and flourishing.
The bottom line: Marketing is an essential investment that you cannot afford to cut. When trimming avoid muscles and connective tissues that are vital to a teams success.
If you are launching a new business or product/service next year, budget 25-35%
Looking to launch a new business, product, or service? It's a critical moment as you start from scratch. But remember, marketing is not just about generating revenue, it's also about raising awareness. And when you have no existing customer base, building brand awareness and establishing a foothold in the market is crucial.
That's why a recent study recommends startup businesses to allocate between 20-30% of their total annual budget to advertising and marketing during the first and second years. At first, this may seem like a significant investment, but an aggressive marketing strategy will ensure that your message reaches a wide audience and creates buzz around your new offerings. By investing in marketing, you can create a strong brand identity, attract potential customers, and establish a competitive edge in the market.
How do you structure a marketing budget?
When planning your marketing budget, it's important to consider your target audience, business objectives, competition, and capabilities. By defining your target audience, you can determine which channels and tactics will be most effective in reaching and engaging them.
Timing is also a crucial factor to consider when allocating your marketing budget. Certain seasons and events may require a higher level of investment in specific areas of marketing, such as holiday-themed promotions or product launches.
It's important to keep in mind that the marketing landscape is always changing, and staying up to date with the latest trends and technologies is essential. Investing in ongoing education and research can help you make informed decisions about where to allocate your marketing budget.
Structuring your marketing budget requires strategic planning, data analysis, and flexibility. By regularly evaluating the effectiveness of your marketing efforts and adjusting your budget accordingly, you can ensure that you're achieving your business objectives and reaching your target audience.
What should My Marketing Budget Include?
When determining what to budget for marketing, it's important to allocate funds to different areas based on the specific needs of your business. Here are some key elements to consider:
People (FTE and Contractors): Hiring talented individuals is crucial for successful marketing. This includes FTEs or contractors with expertise in areas like marketing strategy, content creation, social media management, graphic design, and data analysis. Budget for salaries, benefits, training, and any freelance or agency support needed.
Marketing Technology: Marketing technology is crucial for achieving marketing goals in the digital age. This includes software, tools, and platforms for CRM, email marketing, social media management, analytics, and automation. Consider subscription or licensing fees when budgeting for these technologies.
Media: To manage media expenses, identify the most effective channels for reaching your target audience and allocate your budget accordingly. Consider media buying costs, creative production expenses, and ongoing optimization efforts.
Promotion/Discount Budget: Allocate a budget for promotions and discounts to boost sales and attract new customers. This includes special offers, loyalty programs, referral incentives, or discounts for specific customer segments. Consider the impact on revenue and profits when setting the budget.
Events: Allocate a budget for event marketing if your business participates in trade shows, exhibitions, conferences, or hosts its own events. This includes booth rentals, travel and accommodation costs, event registration fees, promotional materials, and other related expenses. Align the budget with your event marketing objectives and consider the potential return on investment.
What are the three marketing budget techniques?
- Percentage of revenue: Based on how fast we expect to grow and our overall revenue, we can allocate a percentage of our revenue towards marketing.
- Objective-based budgeting: This approach aligns the marketing budget with specific business goals. It helps us optimize our marketing budget by focusing on initiatives that produce the best results.
- Benchmark-based budgeting: Benchmark-based budgeting involves looking at our industry competitors and other established companies to create a baseline for the ideal marketing budget.
At House of Revenue, we specialize in crafting customized marketing budgets and comprehensive marketing strategies that help businesses achieve their revenue growth objectives. Contact us today to learn how we can help your brand thrive in 2024: Contact House of Revenue.
With the right marketing budget and strategy, our brand can achieve our revenue growth goals and become a prominent player in the market. By leveraging cost-effective strategies and data insights, we can grow our customer base, increase sales and profitability, and elevate our brand.