Creating a Marketing Budget That Can Be Justified

Learn How to Build Your Case for a Marketing Budget 

Despite becoming increasingly digital and data-driven, marketing professionals still struggle more than their counterparts in other corporate functions to communicate the business impact of their work. The same can be said for creating a marketing budget.

Most marketers don’t know how to create a budget that can be justified with finance. To create a marketing budget that can be justified, marketers need to present data and metrics to back up their recommendations. Furthermore, they need a plan and a way to allocate their budgets to different channels and campaigns. If you are tasked to come up with a budget, follow the tips outlined below.

Article Contents: How to Create a Marketing Budget

1. What is a Marketing Budget?
2. How to Develop a Marketing Budget
3. Tips on Creating Budgets
4. Marketing Budget Approval Process
5. Defending Your Budget Proposal

 

What is a Marketing Budget?

First, let’s define a market budget and basic concepts. A marketing budget is defined as the a set amount of money over a period of time that a business allocates to a marketing department to promote its products or services.

The goal of any marketing plan or campaign is to increase return on investment, or the contribution to profit attributable to marketing, divided by the total ‘invested’ or allocated to marketing.

Marketing budgets are designed to be comprehensive and cover all marketing channels, not just advertising or digital marketing. Typically, budgets are created and set annually or quarterly before your next budget is developed.

Marketing Expenses Included

What goes into developing a marketing budget? Here are some factors to know before creating your budget:

• Digital campaigns: paid advertising on Google, Bing, YouTube, or other search engines, social media ads,
• Events: Conferences, trade shows, or in-store events
• Freelancers and agencies: outsourced service for content writing and marketing, design, web development, public relations, and SEO support
• Research: Surveys, focus groups, and other market research
• Tools & Software: technology that helps you automate marketing efforts (like Planful)!

How to Develop a Bullet-Proof Marketing Budget

So, how can marketers build a budget that can be justified? Here are some steps to follow when developing your marketing budget.

Step 1: Identify Your Goals

What do you want to achieve with your new marketing plan? When do you hope to achieve it? Your goals should be both qualitative and quantitative and have metrics of achievement. Align your budget to hit those goals.

Step 2: Leverage Past Data Performance

Historical data from channels and past campaigns can help you create yourmarketing budget. Much of this early budgeting work is based on projections and marketing forecasting. By leveraging prior campaigns, marketers can estimate the costs of campaigns in their new plan. Typically, the amount allocated is based on profitability, sales projections, and the amount of revenue brought in from marketing efforts.

Step 3: Develop Your Marketing Plan

Learn more about the steps in the marketing planning process to create a plan that will thrive. Included in your marketing plan should be:

• Market research and analysis
• Situational analysis 
• Company goals
• Marketing goals
• Marketing strategies
• Target audience
• Positioning and messaging
• Product and services direction and definition
• Sales & partner channel strategy
• Product and services launches
• Campaigns and programs
• Marketing channels/vehicles
• Marketing activity timeline/calendar
• Marketing team structure/growth/responsibilities
• Technology
• Budget allocation
• Testing
• Metrics
• Assumptions

For more details on the necessary steps to build a marketing plan, check out our Operational Marketing Plan eBook.

Step 4: Create a Marketing Budget Breakdown

When building an operational marketing plan, take the time to get ahead on the budget, before finance creates one for you. As outlined in your plan, calculate the breakdown in marketing spend by channel or campaign.

Step 5: Factor in All Costs

When creating a marketing budget, you’ll want to ensure that you factor in all (yes, all) costs for your upcoming plan. This includes:

https://planful.com/resources/marketing/how-to-build-an-operational-marketing-plan

• Outsourced services: agencies and freelancers hired for ongoing content marketing, design, web development, online advertising management, public relations, social media, and SEO support.
• Ad spend: this includes paid advertising on Google, Bing, YouTube, or other search engines, social media ads, and print ad campaigns.
• Events: all expenses for conferences, trade shows, in-store, and even virtual events
• Research: surveys, focus groups, and other market research.
• Tools & Software: technology that helps automate marketing efforts (like Planful)!

Step 6: Calculate Total Spend

Calculate the total amount of spend that is needed to hit your goals. By optimizing your marketing spend, you can improve performance while making the most of your marketing dollars. Use historical data from past channels and campaigns as a way to create projections for revenue and ROI.

Step 7: Prepare to Measure ROI

Once your marketing budget is created and approved, you’ll want to ensure you are equipped to measure the marketing ROI of your plan moving forward. Data from our OMI survey states that less than 40% of marketers can measure their return on investment.

Marketers must understand which campaigns have the greatest and least impact with a consistent, comparable metric. Understanding key marketing metrics such as your conversation rate is important for calculating your team’s performance.

Helpful Tips When Creating Your Marketing Budget 

When creating a marketing budget proposal for an organization, keep in mind that the budget should be easily justified and defended. As you develop your budget, here are some tips in mind:

Use Last Year’s Budget as a Starting Point

When creating your budget, marketers can use last year’s budget as the starting point. Then, make adjustments as you see fit. You can base your budget on performance, updates of your plan compared to last year, the current climate of your industry, and the economy in general.

Base Your Budget on a Percentage of Sales 

Use a percentage of sales as the basis for the coming year’s budget. Basing your budget on a percentage of sales can help further justify your marketing budget.

Provide Budget Options 

In the process of creating a marketing budget, providing options is an important step. You should be prepared to provide your management with three marketing budget options: minimum, target, and stretch.

The Marketing Budget Approval Process

Following the process above will help you get the marketing budget you created to get approved by management. Your marketing plan should be the number one thing to justify your budget proposal.

Stakeholders Involved in Decision-Making

Getting buy-in from decision-makers in your organization is a pivotal step in the marketing budget process. While the job titles of these employees can vary slightly depending on how your business team is structured, these are the decision-makers of a marketing budget:

• C-level and executive team – executive leaders will work with finance to determine how the company’s budget is allocated, which includes marketing spend.
• Finance and accounting team – will work with marketing to determine budgets for marketing plans and campaigns, with input and approval from executives and c-level.
• Marketing leadership – an organization’s marketing leader can propose the budget to achieve marketing goals successfully.
• Market channel or campaign managers – marketing managers can weigh in on budgets created for their specific areas of expertise.

More than likely, you will work closely with these stakeholders to get your marketing budget approved.

Defending Your Budget Proposal

What if management does not agree with the marketing budget created? If you find that the decision makers don’t agree with the budget you developed, you’ll want to defend your proposal you so carefully put together.

It’s important to shift your mindset from that of a marketing professional up for a promotion to a leader of a critical business function. Your executive audience only wants to know about the outcomes and results of your marketing efforts when proposing your budget.

If you can break down marketing’s performance, justify how your goals have translated into results for the overall business, and connect your team’s activities to the outcomes, your executive team should indicate why your proposal is justified.

Reiterate your targeted goals

Your plan is designed to hit the targeted goals for the business. When reiterating these goals, be sure your executive team understands how your marketing goals align with the business.

Justify with past performance

Your presentation of your marketing results should be easy to understand for your executive team. Reference your current marketing plan and how it is based on the performance of past plans, campaigns, and activities.

Emphasize the impact of sales

The number of sales you project is directly tied into your budget developed. Be sure to utilize sales figures when defending your marketing budget.

Conclusion: Creating a Marketing Budget

Ready to create your marketing budget? Follow these steps for your next budget you should get your budget approved.

At Planful, we encourage marketers to start with their goals, defined in terms of objective – preferably financial – marketing metrics.

Then, build campaigns to achieve those goals, defining your desired outcomes in terms of objective metrics, achieved through messaging to a specific audience, delivered over the most effective set of channels you can define. What matters most is how your campaign performs in the achievement of those goals, given your budget.