How to budget for marketing!
2017 was a hard year for everyone businesswise and a lot of companies are struggling to pay their bills. So it’s no wonder that marketing as usual is the last item to be budgeted for. I’m not here to write about why you should be marketing, if you don’t know why by now let me know and we can chat. As budgets are tight I’d like to guide you on how to prioritize your budgeting and get the most out of it.
Planning vs. Reality
General rule of thumb in planning for your marketing budget is it can range anywhere from 5% to 10% of your sales revenue. 5% is if you want to maintain current awareness and visibility and 10% to grow and gain market share. If you are a new business I advise you to have a fixed budget to get you started before revenues flow in. You have to put this money aside specifically for marketing it should be an amount your business can afford. The amount identified should cater for everything, i.e. staff, advertising, creative work, printing, outsourced talent, development of plans, any activity related to marketing.
Based on this then you have to be realistic about your budget, if you are a start-up and allocating KES10,000 as your total budget for a month to your social media campaign, then you as the Founder/MD will be doing all the creative, posting etc. hiring someone to assist in any way will dilute the KES 10,000. There is also the issue of cash-flows, please refer below to Execution where I touch on this.
I’ve been asked before, “I need a marketing plan before I can chose or commit the budget. What if I spend all the money making the plan and don’t have anything left to do execution?” My answer is usually, you must know whether you have 1,000,000, 10,000,000 or 100,000,000 over a certain period of time. The planning should take a percentage of your budget. Without a good plan you may spend the money on one campaign and not reap ROI on it or even create a negative brand experience for your target audience. There is no specific percentage you should give to this, but just like anything, if you fail to plan you plan to fail. So be realistic as to what you have vs. the plan.
Branding vs. Lead Generation
There is no sunrise without the sunset. I believe there is no lead generation without branding. No one will buy your product if they don’t know who you are, you can generate leads (actively collecting data) but you will still have to qualify the leads and this will take education and awareness of your products/services before they turn into an opportunity (and possibly have a low conversion rate). So when I’m asked to develop and execute a pure lead generation campaign, I always ask, “what are you doing on branding?” and the answer is usually “we have a good logo”, which of course is only one part of branding. But I digress if I go into what branding is.
The point I’m making is this, the approach should not be either/or but how to do both in the most cost effective way that will generate ROI, basically impact your bottom line. And this would be through an integrated campaign that does both branding and lead generation. With limited budgets you have to kill two birds with one stone.
So you have your marketing plan and are going into execution mode. So you start with the activity that maybe appeals to you the most and begin spending. But companies need to remember the marketing plan is a combination of branding and lead generation and the activities have the most impact when executed together. As I mentioned, be realistic, with the cash you have do not put it all in one basket, split it amongst 2 or 3 key activities that will have the most impact to achieve your objectives. Starting a campaign and not being able to complete it or have no other point of contact with your customers will not only confuse your customers, but will be expensive in the long-run. You will have to spend more later to rectify the mistakes made in the initial campaign. Also, realistically, if you are having cash-flow issues, then you will not be able to pay for advertising space, or staff, or the activity planned for.
Basically, what am I saying? Your budget is your budget, money won’t appear from somewhere, so plan according to what you have and be smart in how you allocate and execute the budget to enable your business to meet its objectives.
Written by Cynthia Kahumbura, Partner-Nkemi Consulting a Strategy, Advisory and Execution firm. Email: firstname.lastname@example.org