It’s not uncommon for marketing leaders at small-to-mid sized tech companies to kick-off the new year with a request from their executive team to evaluate upcoming marketing expenditures.
Those facing such a challenge should turn to industry best practices for setting a comprehensive marketing budget based on your organization’s goals, revenue and sales.
In crowded markets like health IT and biopharma, where new products are popping up every day to compete for the same eyeballs, you can’t depend on last year’s strategy to drive future success.
No More Cut and Paste
While there are various ways to estimate how much your organization should spend on marketing, the reality for many marketers is that budgets are often developed using the cut and paste approach. In other words, your current year’s budget is based on how much the department spent the year before, give or take a few dollars depending on how well the sales team has been performing.
While this approach may be the path of least resistance, what ends up happening is that you’re buying the marketing you can afford instead of pursuing strategies, channels and tactics that align with where your organization is headed.
The Big Picture
As you juggle line items to budget for (and justify to the C-suite) everything from trade show participation and online ad spend to SEO and keeping your martech stack current, not to mention in-house resources and content development, it’s critical that you take a step back to look at the big picture.
Key questions to ask during the budgeting process:
- Does your marketing budget align with your company’s goals and revenue targets?
- What KPIs are you using to measure marketing success?
- Is the competition outspending you?
5 Approaches to Setting an Effective Marketing Budget
Once you have an understanding of your organization’s priorities for the year ahead, how you’re measuring success and what the competitive landscape looks like, you’re ready to start crunching the numbers.
Here are five industry best practices for setting a marketing budget:
- Percentage of projected revenue
- Percentage of net sales
- Percentage of growth delta
- Percentage of overall budget
- Desired conversions or new customers
Even better, these approaches use the figures your executive team is already closely monitoring. You’re not only speaking their language, you’re elevating the value your department brings to the organization by showing the direct line between marketing expenditures and what’s important to the C-suite.
Want to learn more about these approaches?
Click here to read an in-depth review of how to calculate a budget based on these approaches.
While setting a marketing budget can seem daunting, using one or more of these approaches is a formula that will set you on the path to success.