For Chief Marketing Officers (CMOs), budget planning is always a nagging ache. No matter the month of the year, your sights are set on this critical responsibility. Of course, a well-planned marketing budget ensures that resources are allocated efficiently and the desired outcomes are achieved. So if you’re embarking on this in August or hot on the heels of the end of Q4, this blog post can help you with the key steps involved in calculating your marketing budget so you can make informed decisions.
Step 1: Set Clear Objectives
What’s a plan without a goal? Right? Before diving into the financial aspect, it is crucial to establish clear marketing objectives. These objectives should align with the overall business goals and be specific, measurable, achievable, relevant, and time-bound (SMART). By setting clear objectives, CMOs can determine the resources needed to achieve them and prioritize investments accordingly.
Step 2: Analyze Historical Data
We’re marketers, so we measure and synthesize data to give us a deep understanding of historical data to identify trends and performance. Spend some time reviewing previous marketing campaigns and their outcomes so you can accurately assess what worked well and what didn’t (Like that influencer campaign you did! We’ve all got one.). By analyzing data on customer acquisition costs, conversion rates, and return on investment (ROI), you as CMO will gain valuable insights to inform your budgeting decisions.
Step 3: Determine the Available Budget
Show us the money! The next step is to determine the total budget available for marketing initiatives. This can be influenced by factors like overall company revenue, profit margins, and the organization’s financial goals. Start collaborating with your friends in the finance department and get aligned on the budget allocation process.
Step 4: Allocate the Budget by Channel
Once the overall budget is determined, CMOs need to allocate funds to different marketing channels. This allocation should be based on a thorough understanding of the target audience (stop here if this isn’t clear for your audiences – plan to invest in target audience research before you even drop a dime on other initiatives), their preferences, and where they can be reached most effectively. The marketing mix may include channels such as digital advertising, social media marketing, content marketing, events, public relations, and traditional advertising. Each channel’s effectiveness and expected ROI should be considered when determining the allocation.
I attended a stellar webinar this summer about how Attribution is Dead – so don’t assume! Dive deeper into understanding where campaigns and customer touchpoints ACTUALLY influenced buying decisions. There are great tools out there using AI that can help you sort your data and give you a true picture of what marketing mix worked to drive revenue and where you should put your money next campaign.
Step 5: Consider Seasonality and Campaign Timelines
Seasonality and campaign timelines play a crucial role in marketing budgeting. Some industries experience fluctuations in demand throughout the year (you better damn well know this about your industry if you’re slapping a “CMO” title on your email signature, but I say it because…well, certain campaigns may be time-sensitive). This means you should consider marketing efforts that align with those peak seasons, product launches, or specific promotional periods.
Step 6: Keep Room for Flexibility
In today’s rapidly changing business landscape, flexibility is key. We strongly consider you allocate a portion of the marketing budget for experimentation and innovation (Hello, AI!). This allows for testing new strategies and tactics that may yield unexpected but valuable results. And it never hurts to build in a contingency fund to help address unforeseen circumstances or opportunities that pop up during the year.
Step 7: Monitor and Evaluate Performance
Once the budget is allocated and the marketing initiatives are implemented, you’ve got to monitor and evaluate performance regularly. Get your key performance indicators (KPIs) defined for each marketing channel and campaign right away. We’re pretty “analytics heavy” here at Fajen Consulting because tracking and analyzing results prove effectiveness and it’s going to tell you if you need to consider a pivot. Don’t slack here, friends!
As you prep for the budget year ahead know that calculating a marketing budget is a strategic process. It requires careful planning and analysis. As a CMO, you’re already wicked smart and you’ll carefully align marketing objectives and overall business goals, allocate funds based on historical data and target audience preferences, and definitely consider factors like seasonality and campaign timelines. Be nimble! Maintain flexibility and monitor performance to make informed decisions and optimize budgets over time.
You’ve got this…and if you don’t, call us! This is where we shine! 🙂