Business

How to do a marketing budget: expert method and tips

Marketing plan

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After you have defined the marketing measures in the marketing mix, you can now summarize them when you do a marketing budget. When it comes to marketing budgets, make sure that you take into account the total cost of advertising. Also, make sure your marketing spend is in the best possible relationship to reach. Review your marketing budget by comparing total marketing spending with your industry’s benchmarks. 

Basis for the marketing budget: The marketing mix

The customer will not buy the best product if he does not know it – so marketing is important.

In the chapter Marketing Mix (the 4Ps of marketing) you have worked out the various marketing measures. Now it is a matter of putting the planned marketing measures into figures and creating a convincing marketing budget. Don’t forget topics such as total advertising costs and advertising efficiency.

Consider marketing measures in the marketing budget

As you can find Communication have already defined which marketing measures you have planned, you can now start creating the budget.

Note that focusing on a few marketing measures is usually more effective. At the beginning, limit yourself to “only” 2-3 marketing measures and advertising materials that best reach your target group – so you can avoid too much scattering and thus unnecessary costs. You can then add additional marketing measures after the company starts.

Once you have defined the final marketing measures (i.e. what marketing measures, which media and the frequency of the advertisement), you can create the budget.

Attention: Take into account total advertising costs!

The marketing budget often does not take into account all advertising costs. Therefore, make sure that your budget does not forget the following points when calculating your advertising costs:

  • Travel expenses (including time; especially relevant for the field service)
  • Design costs (design of advertising)
  • Production costs (production; e.g. printing of the poster)
  • Media costs (costs for distribution and publication, e.g. in magazines, radio, etc.)
  • Additional costs (e.g. taste samples, gifts, etc. )

In addition to the total advertising costs, you should pay attention to another point in the budget: advertising efficiency.

Efficiency as an important criterion for marketing measures

Finally, the following also applies to marketing measures: an attractive price/performance ratio is decisive. For the calculation of the advertising efficiency of individual marketing measures, compare the price you pay for a medium (fair, poster, online advertising, etc.) in relation to the reach (how many people in your target group you reach with the appropriate medium can). 

With a budget in which you have checked individual measures for efficiency, you can not only avoid unnecessary costs, but also convince potential investors!

While advertising efficiency doesn’t say much about the quality of marketing, the ad efficiency calculation allows you to determine relatively easily how much you need to spend per customer contact with which medium.

By the way: Especially on the Internet you can see relatively quickly which marketing measures pay off (the keyword here is called conversion). 

Marketing Budget Check: Indicative Values

What is the appropriate marketing budget? Is it 3% of the volume of sales, as in the case of suppliers to the automotive industry? Is it 8-10% of the volume of turnover, as is often the case with companies in the service sector? Or is it even 30% of sales, as in Red Bull, for example? 

Setting benchmarks for a marketing budget is complicated and depends on the respective business model and the industry accordingly. Just take a first step in how much your industry spends on advertising on average. Then add at least 25%-50% to this value (if the average is 4%, you should expect at least 5-6% for your marketing activities) as you as a new company you need to invest more in advertising to promote your products . 

If you can’t find industry metrics, we recommend that you calculate 10-15% of your marketing budget, which is roughly equivalent to the golden middle.

The goal is …

… that you create a convincing marketing concept in your business plan based on the 4P’s. The individual marketing measures must then be taken into account in the marketing budget. Don’t forget topics such as total advertising costs and advertising efficiency in the marketing budget. 

The marketing budget will then be included later in the financial plan, which you will use after the next chapter of the business plan, the operational organisation, are created.

Newspapers, radio, TV, and online media provide information about the target groups in the media data – use this information for your research and the selection of the appropriate marketing measures and thus ensure an efficient marketing budget!