In the course of pushing a product to the masses, you are definitely bound to spend some money. As with any other form of expenditure, this one too ought to be tightly within a budget. That is to see to it that the revenue inflows offset the actual cost of marketing and hence prevent any losses.
You will have to draft and adhere to a strict marketing budget to be able to achieve this end. How else can you do this without the necessary support, guidance, and inspiration to that end? Our guide here exists to do just that. Kindly take your time to read and find out how.
Importance of Marketing Budget
A marketing budget brings about a couple of benefits to the establishments that employ it. Here below are some of the benefits that such firms stand to accrue by laying their hands on it:
Projects the Returns on Investments
With an effective budget firmly in place, it is possible for you to project the anticipated returns on investments. This is mainly because it enables you to make comparisons between the amount of money you spend to push the product versus the anticipated revenue inflows.
Helps you to Stay Profitable
By knowing how much you stand to accrue for every sale or marketing initiative, it is also possible for you to stay profitable. That is because such a piece of knowledge enables you to rationalize your expenses in such a way as to keep your income or revenues greater than it at any given time.
Minimizes wastage and Revenue Leaks
A typical budget also contains the steps that may have to be followed to get to the desired end results. If these steps adhere to the letter, they have the impact of minimizing wastage and the attendant revenue leaks. The sum total of these two results in higher profit margins.
Aids in Product Development
You can never hope to develop and introduce a new product without budgeting for it. The Budget in this particular context serves to showcase the amount of money that is set aside for the product feedback, surveys, actions, and testers that are crucial to the launch of the product to the market.
Creates Synergy among the Team Members
Given that the Budget also contains the steps and procedures to follow to attain a given end, it inevitably creates synergy among the various members of the team. While at it, the Budget prevents conflicts of interests, confusion, and the wastes that potentially arise when executing tasks and plans.
Helps with Long-term Planning
Every organization has long-term plans that guide its operations and vision. Budgeting is one critical component of such plans. It gives a breakdown of the steps and procedures to be followed to actualize that end. It basically gives you the focus you need to get to the desired goal.
Facilitates Monitoring and Evaluation
The Budget also facilitates monitoring and evaluation. This stems mainly from the fact that it gives you the yardstick to measure the progress you have attained thus far. You do this against the goals you had initially set. By this arrangement, you channel your efforts precisely to where they are supposed to go to.
How to Set a Marketing Budget
Knowing how to set a marketing budget, as we have already elucidated, is a critical step towards leveraging the benefits that it potentially brings about. We devote this segment of our discussion to just that.
Step I: Determine your Overall Plan
For a start, you have to determine your overall plan. It is this that will act as a framework against which to set the goals and subsequently assign some estimates. The plan has to be consistent with the vision of your company and has to be quantified for detailed planning.
Example of these are:
Goals: These are the actual things or yardsticks you would wish to achieve over a given period of time. The goals have to be direct and to the point. Then, they should also be broken down into specific timelines that are easier to follow through and implement.
Target Market: Who are you setting your eyes on? It is important that you clearly define the persons or cadres of persons whom you plan to reach out to. That way, it will be possible for you to know the steps and approaches that may most likely yield the required end result.
Mode of Distribution: How do you intend to avail of the various products and services to the target market? This is necessary as it acts as the guide against which you may subsequently channel your marketing efforts. Match this model of distribution with the specific target audience for more convenient handling.
Monitoring and Evaluation: From time to time, you will no doubt have to examine your goals against your progress to check whether you are on track or not. Thus, your goals also have to include some monitoring and evaluation. If you sell your merchandise online, consider employing analytics tools as they, too, do a good tracking job.
Step II: Outline your Sales Funnel
A sales funnel is a series of steps that your prospective client has to follow to purchase your product or service. Though not quantitative, this step is nonetheless equally crucial as it helps the client to know the steps to take to actualize a purchase. Remember, it is through sales that revenues flow into the firm.
A typical sales funnel outlines:
- The means and ways that your clients will use to find you
- What they ought to know before they consider placing an order
- The factors they have to care for while assessing their orders
Step III: List down all the operational expenses
You now have to list down all the operational expenses. They are the ones that are subtracted from the revenue inflow to compute the gross profit. Be sure to be detailed and leave nothing to chance. The amount of detail you put in place will determine, to a large extent, how successful the budgeting will be.
As you do this:
- Keep track of your sales revenue versus the expenses
- Make projections of your future sales and profits based on your current performances
- Maintain your advertising and marketing expenses as low as possible (no more than 6-7% of your gross revenue)
Step IV: Set and adhere to some strict goals
It is imperative that you set and adhere to some strict goals. These are the ones that shall guide you in implementing the provisions of the marketing budget and the marketing initiatives. Some of the questions you might ask are, ‘how much revenue are you targeting?’ ‘how many unit sales should you make?’ and so on.
Step V: Be watchful of the competition
You are definitely not alone in the field where you are. There are other players who are similarly competing for the selfsame number of clients. You have to factor them as well while drafting a marketing budget. It is only then that you will be able to stay competitive.
While at it, try to figure out:
- Who are the key players in this field?
- What methods of advertising do they use?
- What makes them stand apart from the rest?
- How much money do they use to sell their products?
Step VI: Create the Plan
Having collated every bit of detail you need to; the time has now come for you to create the plan. This plan is merely a written interpretation of the steps and the figures you will have come across above. It has to be detailed, succinct, and straight to the point. Leave no room for ambiguities at all.
To create an effective outline, find out:
- How much money you will need to actualize your goals
- The various tools-of-trade you will need for the job
- The behaviors and likely responses of your target market to your advertising approach.
We bring an end to our detailed guide into the marketing budget there. It is our hope now that you have the insight you need to do a better job. Having done that, we now urge you to move with haste to actualize the pieces of information we have generously furnished.