How to Set a Marketing Budget When You’re Not Sure Where to Start

A marketing budget is the money you set aside to spend on marketing activities for your business. This can be done yearly, quarterly or monthly – whatever works for your business.

In this article, we will look into where SMEs spend their budget in the wrong places, how to allocate your budget, what to prioritise for the first year and signs your budget isn’t working for you.

Why Most SMEs Underspend or Spend in the Wrong Places

Small and Medium-Sized Enterprises (SMEs) often have issues with their marketing budget because there is a lack of financial guidance or understanding.

A great tip is: don’t just concentrate your marketing budget on new customers. You need to retain your current customers as well, and gaining new customers costs more than keeping existing customers.

Stay visible with your current audience through website updates, case studies and service add-ons. Following up with customers and having strong visibility increases customer loyalty and makes sure they keep coming back to you.

Trying to be everywhere at once and spreading your budget across all platforms usually results in weak results. Constantly marketing across platforms like TikTok, Instagram, Facebook, email, SEO and more may mean you’re spreading your budget and resources too thin.

Being on multiple platforms also presents a lack of strategy as jumping between platforms and tactics doesn’t show results on what works for your business or what your objectives are.

Each platform has a different target audience and aligns with different marketing objectives which will impact how well it reaches your target audience and how many quality conversions you receive. For example, different social media platforms have different target audiences and helps build brand awareness whereas email marketing helps to build long-term, customer relationships.

Focus on quality over quantity; choose 2 or 3 platforms to concentrate your budget on, particularly ones that appeal to your audience and measure the engagement on those platforms. Be consistent on those platforms before expanding into new ones.

Set clear objectives like visibility and sales to measure against. Once you have chosen your objectives, choose what tactics resonate with your audience and use this information to build your strategy.

By using Google Analytics and ad platform conversions, you can regularly review campaigns to see where leads are being generated from to reallocate the budget to what’s achieving results.

A marketing budget is not an immediate expense but a long-term investment for your business. SMEs need to measure and track their budgets to see the Return of Investment (ROI) as it presents what marketing works for your business and where to invest the budget.

A Simple Framework for Allocating Budget

Your budget needs to present what your business’ marketing goals are and how much your business plans to spend to achieve them. Channels your business could choose are:

• Paid advertising
• Email campaigns
• Websites
• Social media
• SEO

However you choose to market yourself, your budget needs to represent the frequency you intend to carry out the activity.

If you are looking for a framework on how to allocate your marketing budget, an established strategic model is the 70-20-10 rule.

• 70% – Allocating 70% of the budget towards established channels and proven core strategies that consistently generate revenue minimises the financial risk and provides a baseline for your business.
• 20% – By investing 20% in growth, new projects or strategies showing early signs of promise, this allows for the potential of new audiences and expansion on the baseline your 70% creates.
• 10% – This is set aside for experimental innovation, focusing on high risk or untested ideas. 10% provides a controlled space to discover potential high performing channels before any of your competitors.

The 70/20/10 rule helps your business to grow sustainably by balancing reliability, optimisation and innovation, preventing you from managing your budget too safely or spending it the incorrect areas.

What to Prioritise in Year One

By prioritising specific areas of your marketing budget, it builds the foundation of your strategy and aligns business objectives with execution.

Brand Identity

By focusing on brand identity in year one, it allows for the business to be easily identified and to stand out from competitors. It builds a cohesive message that can be used across all campaigns; a consistent message results in trust and credibility as it instils confidence to customers.

Customer Research

Customer research provides evidence for data-driven decision making. This ensures your business understands your audience and produce campaigns that are targeted towards the right people. This reduces wasted budget and can increase the Return On Investment (ROI).

Retaining customers is important to your marketing budget because it is cheaper to retain a customer rather than gaining new ones. So much so, retaining just 5% of customers can result in a 25% to 95% increase in profit. Repeat customers also have a higher lifetime value as they spend more with you.

Content Creation

Consider prioritising content creation because it builds relationships and long-term brand awareness by boosting engagement with customers. Content creation also increases your Search Engine Optimisation (SEO) through the use of keywords.

Prioritise areas that define your business and ask yourself: What message do you want to deliver to your audience? Who are they and what are their needs?

Signs Your Budget Isn’t Working

If you can’t identify what is or isn’t working for your business, then it’s hard to understand why your business isn’t growing. Here are some warning signs your marketing budget isn’t working:

• Increasing traffic but conversions are flat – More customers doesn’t mean more value. If this is the case, then this may be due to a slow website, weak messaging or targeting the wrong audience.
• Chasing new customers constantly – If a campaign stops and sales disappear, then you are not creating repeatable growth potentially due to a lack of customer loyalty, brand awareness or referral activity.
• Every channel delivers poor ROI – When you are starting out with marketing, some experimentation is needed however, it is expected at least one channel is working for you. If every channel is producing weak results, the targeting or product-market fit may be wrong or there is inaccurate reporting.
• You can’t explain your strategy or why it works – A collection of tactics that do not connect is not a strategy. You need to have an understanding of what works and why it generates leads for the business.

Your marketing budget is a balancing act; these are the main areas of your budget to focus on but it is important to get your budget right to optimise resources. Logic Design are professionals in what we do, helping to grow businesses with marketing strategies tailored to individual client’s needs. Get in touch with us today to find out how we can help you. Visit our contact page, give us a call on 01473 934050 or email us at [email protected].

Written by Holly Weller Marketing Assistant

Holly Weller is one of our Marketing Assistants currently studying BA Business Management focused in marketing alongside her work. She is interested in exploring different marketing channels and furthering her knowledge in the industry. When she’s not working or studying, she’s playing padel with her partner or on the netball court.

All Articles by Holly Weller