Tired of scrambling for marketing funds or wondering if your spending is actually working? A well-structured marketing budget is your roadmap to reaching the right audience and maximising the ROI of your marketing campaigns.
We all know how important marketing is, it powers our sales and drives our growth. But when it comes to running marketing campaigns, businesses and charities often end up splashing the cash with no idea if it's achieving anything or are so hesitant to invest that they miss out on opportunities.
Having a budget for your marketing campaign is therefore an essential way to make sure it delivers commercial results.
TL;DR?
It's important to have a clear framework for creating a marketing budget that drives results. That means setting achievable goals based on market research, channel selection, cost estimation, and more. "What gets measured gets managed" or so the saying goes, and you can't do that without establishing your revenue target, identifying your fixed and variable costs, calculating your break even point, and then ensuring that you work within the constraints you've set.
The power of a budget for your marketing campaigns
Imagine your marketing efforts as a powerful engine. Your budget is the fuel that keeps it running smoothly. Without it, you risk running on fumes, stalling your progress, and not reaching your destination. At the same time, you don't want to find that you're using too much fuel relative to the journey you're undertaking.
Here are five great reasons why every marketing campaign you ever dream up should have its own budget:
1 Financial control
Creating a budget helps you gain better control over your financial resources. By outlining both fixed and variable costs, you ensure that you're allocating funds appropriately and avoid overspending, which is crucial for maintaining financial stability
2 Resource allocation
A budget helps in allocating resources effectively. By considering all costs, you can prioritise where your marketing £ should be spent to achieve the best Return on Investment (ROI). This ensures that resources are directed towards activities that drive the most value for your business
3 Goal alignment
Setting a budget ensures that your marketing efforts are aligned with your business goals. By understanding the costs involved in running your campaign, you can tailor your approach to meet specific objectives, whether that's increasing sales, brand awareness, or customer engagement
4 Performance evaluation
Having a budget allows you to track and evaluate the performance of your marketing campaigns more accurately. By comparing actual expenses against the budgeted amounts, you can identify areas of overspending or underspending and make necessary adjustments to optimise future campaigns
5 Risk management
Budgeting helps in mitigating risks associated with marketing campaigns. By estimating potential costs upfront, you can assess the financial feasibility of your campaigns and make informed decisions about resource allocation. This proactive approach minimises the risk of unexpected expenses derailing your marketing efforts
Your budget roadmap: a six step guide to creating the perfect marketing campaign budget
Crafting a marketing budget doesn't have to be overwhelming. There are six key steps involved, let's take a look at them:
Step 1: Define your objective and revenue target
What are you trying to achieve with your campaign? Is it brand awareness, obtaining leads or making sales? If it's the latter, what's your revenue target for the campaign?
Step 2: Know your market
Who is your ideal customer? Where do they hang-out online? What messages are likely to resonate with them and motivate them to pay attention or take action?
Step 3: Choose your channels
Consider which channels are going to work best when it comes to reaching your target audience, will it be online advertising, social media, content marketing., etc?
Step 4: Estimate fixed and variable costs
If there are fixed costs (like paying an agency a fixed price to design and run a paid social campaign), make sure these are accounted for along with costs that will fluctuate according to campaign success
Step 5: Create your budget
Record your revenue target, fixed and variable costs along with a timeline of when costs will be incurred and revenue will be generated. For each, create a BUDGET, ACTUAL, and VARIANCE column, where the BUDGET column is completed. For good measure, calculate your break even point - the number of units you'll need to sell in order just to cover your campaign costs - and then plot the expected profit your campaign will earn. And, finally, calculate your anticipated Return On Advertising Spend (ROAS).
Step 6: Track and adjust
Once your campaign has launched, record actual revenue and expenditure in the ACTUAL column, and highlight positive/negative differences in the VARIANCE column. This way, you'll be able to see at-a-glance if your campaign spending is being constrained the way you planned, and that it's delivering profitable outcomes.
The importance of creating a marketing budget that covers all associated costs
You may have noticed that we keep repeating this point, and that's because it's mission critical.
When you're planning a marketing campaign, it's easy to fall into the trap of painting a false picture of profitability by failing to account for all relevant costs.
As marketers, you can't rely on profit-per-unit alone. Total costs and campaign objectives must also be factored in.
Creating a fully costed marketing budget will highlight whether or not your campaign is likely to be a success or an expensive dud.
Worked example*
You're planning a marketing campaign to increase sales in the next quarter. Your revenue target is £5,000, with your product selling for £19.99. You know your Ideal Customer Persona already and have decided that ads on Facebook are likely to be your best channel. The cost-of-sales per unit sold is £4.99.
So, your numbers look like this:
Revenue target
£5,000
Sale price
£19.99
Variable Cost-of-Sales
£4.99
Profit-per-unit
£15.00
Armed with these numbers, you can see that you'll need to sell 251 units to make your revenue target, and that doing so would yield a profit of £3,765. Hurrah!
Hold-up, you forgot to include the cost of the freelancer you're planning to hire to create and run your Facebook ad campaign, which comes at a price. So, now, as well as your variable cost-of-sales per unit, you also have a £1,000 fixed campaign cost to recover.
That's OK. When you deduct this from your forecast profit, it leaves you with a healthy £2,765 profit, so all is still well.
But wait, this doesn't include your Facebook ad spend. Your freelancer predicts that your ads will achieve the global average conversion rate of 2%, and that each click will cost 60p (your Cost-per-Click or CPC). So what does this add-up to? Well, if you need 251 conversions at a 2% conversion rate, you're going to need 12,500 clicks on the ads sending people to your product page, and with a CPC of 60p, that's a whopping £7,530 in ad spend you can expect to clock-up. Yikes!
Suddenly, what looked like it was going to be a winner now looks like a loser that would be responsible for a £4,765 loss.
Had all relevant fixed and variable campaign costs been properly considered and budgeted for, these oversights wouldn't have occurred - instead, it would have provided an early warning sign enabling you to rethink your objectives and approach.
5 actionable takeaways to help you create a realistic budget for your next marketing campaign to deliver a great ROI
So, after reading this, you're eager to get on and create a budget for your upcoming marketing campaign right?
Here are five things to focus on to help you do that:
1 Define your goals and target audience
Before diving into costs, clearly define your marketing campaign goals. Do you want to increase brand awareness, drive sales, or generate leads? Understanding your objectives allows you to allocate resources strategically.
Identify your ideal customer. Research their demographics, online behaviour, and interests. This helps target your advertising effectively and avoid wasted spending.
2 Gather cost estimates
Research average costs for your chosen marketing channels. This might include cost-per-click (CPC) for online advertising, design fees for creatives, or influencer marketing rates.
Estimate campaign duration and ad spend based on your goals and target audience. There are online advertising calculators and industry benchmarks to help guide you.
3 Factor in ALL relevant costs
Don't forget fixed costs like platform fees, analytics software subscriptions, or freelancer and agency management fees.
Consider hidden costs like ad testing budgets or content creation expenses.
Add these to the variable cost-of-sales.
4 Calculate Break-Even and profitability
Use a break-even formula to determine the minimum sales needed to cover all your campaign costs.
Estimate your expected profit by factoring in your revenue target, variable costs, and total campaign spend. This helps assess the potential return on investment (ROI) before launch.
If your assessment suggests that your campaign will not be profitable enough / make a loss, and your ROAS is under 100 (which means you're in negative territory) then you will need to reconsider your campaign and see what changes can be made in order to improve its likely outturn.
5 Plan for optimisation
Set up analytics tracking to monitor key metrics like click-through rates, conversion rates, and cost-per-acquisition (CPA).
Allocate a portion of your budget for testing and optimisation. Regularly analyse your data and adjust your strategies to improve performance and maximise your ROI. This is why it's important to have a BUDGET, ACTUAL and VARIANCE column in your budget so you can keep a watchful eye on what's happening in reality once your campaign launches, changing tack if needed.
*We've purposely oversimplified this for illustrative purposes. In reality, the Facebook ad spend could be significantly lowered by using a full-funnel structure that sees cheap awareness and consideration ads driving purchasing desire so that the conversion costs are reduced. It also doesn't allow for cost controls in the setting of the Facebook campaign budgets. And it also makes no allowance for the targeting of custom audiences such as those who have engaged with ads and and associated landing pages higher up the funnel. But you hopefully get the fundamental point which is all about identifying and exposing all relevant campaign costs.