Budgeting season is upon us. Like us, we’re sure you’re thinking and talking about your 2023 marketing budgets.
Setting a 2023 Marketing Budget: Where Do You Start?
There are different approaches to budgeting for marketing expenditure. In some organizations, the marketing team is given a set amount to spend, and they’re expected to figure how to best accomplish the goals set before them with the budget they have been given.
In other cases, the marketing department takes the lead. We would consider this the ideal scenario.
However, when this is the case, many marketing departments will learn the standard budget for their industry and then align their budget to some percentage of revenue. They then replicate this year-over-year.
But this tame, status-quo approach to maintaining a marketing budget encourages low-growth goals, and likely leaves a lot of revenue on the table. If you’re a marketing professional, you were hired to drive your company’s presence forward in the minds of consumers. So rather than the approach of “let’s just keep the same budget and adjust for inflation,” today’s marketing budgets should be proactive, goal-based, and inherently flexible.
Goal-Based Marketing Budgets: Get More Green by Aligning with Company Goals
You’ll have to be goal-oriented. And by that, we don’t mean “Set marketing goals.” No, it has to be far bigger than that.
Align every marketing effort to the business’s overaching goals. Those business goals are the explicit goals of leadership. Align your interests with theirs.
That’s what we recommend: Work your way through each of the company’s quarterly and annual goals and tie marketing efforts to each one as relevant. This will resonate with company leaders, and you may even find you get more budget than you ask for because they’re excited that you share the same big-picture vision as they do and want to help you drive toward it.
Make your goals, their goals.
Marketing in its best perspective is holistic of the company—it must be tied to the company’s goals.
Do this, and you will reposition marketing as a strategic revenue-center, rather than a cost center.
Let Data Drive Your Requests
You’re being asked to bring in 400 new leads next year, but the company has never gotten half of that before.
Sound familiar? Make your numbers talk, and the data will save the day. Why position yourself as the bad guy when you don’t have to?
Aligning Unrealistic Stakeholder Expectations
Pull up the data from the past three-to-five years and show the leadership what a realistic expectation looks like. Good leaders will listen, but they may have to be confronted by similar data from three different directions first.
You’ll want to have as much data available as possible:
- Calculate your cost per lead (CPL) and customer acquisition cost (CAC)
- Look through conversion rates
- Tabulate your click-through rate (CTR) for every webpage and paid search ad
- Tally up your open rate for every email and make sure you include any and all A/B test results
So, if your leadership gives you a reachable target of, say, 80 new customers, and you have calculated that your CAC is $800, the data will persuade them to increase your marketing budget to at least $64,000.
Or, they’ll lower the target to a more attainable goal, and now you have creditability and leverage for the next budget discussion. You’re more likely to be consulted proactively next time!
How the Past Year Can Set Up a Strong Next Year
Don’t let leadership miss all the wins you got this past year.
Show them. The better that leadership feels about last year, the more likely they are to approve your budget.
The money they invested accomplished something tangible. They can expect the same this coming year.
Did you have any losses, perhaps some failed experiments? Use the data to explain them and chart a corrective course for the coming year. People sense a “too good to be true” story, and marketing needs to be testing new ideas. Some tests won’t work. That’s okay.
Business leaders don’t want to gamble—they want to invest. Cull your data to explain why you think the avenues on which you intend to spend the money are tangibly worth pursuing.
Ensure that your leaders see that what you’re proposing is based on hard, scientific numbers. Make them excited to get behind this marketing effort that has an X probability of bringing in Y number of leads and Z upsells. Likewise, tell them the exact percentage likelihood of opening any new markets your numbers have identified.
Diversify Your Strategy
Last year’s success is a good baseline. Optimize what has been working and leverage it for the coming year. But don’t stop there.
You can’t assume that what worked in the past will always yield the same measure of success. We call that sitting on a one-legged stool. It’s dangerous.
Set Aside Some Money for Experimentation
Consider the changing nature of marketing in this digital age. Don’t ever let yourself get too comfortable with the status quo because it will change on you. Digital marketing, for all its power, is by nature trend-based and ever-changing.
Marketing avenues rise and fall within a decade. Had we even heard of TikTok four years ago? And yet now it’s being leveraged in certain markets as an indispensable marketing channel.
On the other hand, think of the shaky foundation upon which we build some of our endeavors, which later prove unreliable.
We invest hundreds of hours and thousands of dollars in SEO optimization. We grind to get our page rankings up. And then Google releases another update that for some reason bumps you to page two!
Because of this reality, we recommend that you always be looking for the next strategy since you may need a fallback. Set aside a portion of your budget for experimentation—to search for the next TikTok.
This will be harder to convince your leadership to get behind, but if you are never told no, then you probably aren’t pushing hard enough. The best marketers are forward-thinkers.
The bottom line: Invest in what works, but allocate a portion of your budget to experimental marketing.
Leverage Your Competitors to Strengthen Your Budget
One way to get leadership on your side with the experimental investments is to remind them that your competitors aren’t asleep.
Your leaders probably want to lead the industry, so frame the discussion around how you are going to beat your competition and make them play catch up. Don’t talk about being like the competition, but about how a strong marketing strategy can differentiate you from the competition and get ahead.
Identify channels that your competitors aren’t utilizing well, and then rally your generals: “We are going to get our message in front of every one of our competitor’s customers with this strategy.”
Encourage them: “Let’s make them follow us, not the other way around!”
A strong strategy can shift the thinking of the market so that potential buyers use you as the measuring stick by which they measure your competitors. Remind your leadership of this!
Outline new cutting-edge strategies that people are just now testing. If mastering it will require you to hire an expert consultant, ask for that in your budget proposal. Get the C-suite excited, and they are more likely to fund your creative endeavors.
One warning here: Don’t let this competition-focused messaging get into your actual marketing. Doing so frames your competitor as the industry leader you’re trying to catch up to—and you never will when you think like this.
Keep the rhetoric internal and leverage your leadership’s competitive edge.
Secure Your Place as the Company Authority
All of this will be nullified if you walk into a budget discussion unprepared. You may have the data behind last year’s endeavors, but make sure you also have a clear grasp on your costs.
What are you spending on software, freelancers, ads, and the team itself? Combine these costs with the investment into each channel, then divide it by the number of leads generated to calculate your Cost Per Lead.
Know your sales data. How many of those leads are turning into sales? Use these numbers to calculate your Customer Acquisition Cost.
The Bottom Line:
You are able and expected to come up with new ideas for how to reach potential customers and define new markets. You have been hired, in a sense, to lead the company’s direction creatively forward into your market.
So, lead! Drive!
Having this information at the tip of your fingers will establish you as an authority within your company because you’re speaking statistics rather than subjective opinions. Your leadership will listen, and they’ll come to you again in the future.
And if you want some help spending your successfully-validated budget as effectively as possible, reach out to New North—we’ll get you results.