With an economic downturn looming, it’s not surprising around 75% of CMOs report being asked to do more with less in a Gartner survey. Marketers are finding it increasingly difficult to set the right budget, optimize it and keep the leads flowing.
Managing social media and other marketing channels in this economy can be challenging. You’ll need a plan to address top budget concerns to provide clarity and control over every dollar spent. It will help prioritize vital areas, avoid overspending and adapt to unforeseen challenges.
In this blog, we’ll cover:
- How to budget for your marketing needs
- Optimizing your marketing budget: Best practices
- Marketing budget breakdown
- Sample marketing budget
How to budget for your marketing needs
To set a marketing budget, you will need to look at past records, do thorough market research and analyze your team’s needs. Let’s look at these steps in detail.
Take a look at past results
The phrase “Yesterday’s lessons, tomorrow’s innovations” holds true when setting marketing budgets during a recession. It’s all about knowing what’s working, and focusing in on activities and core channels that are delivering.
See where your dollars had the most impact in the previous year—the campaigns that brought the biggest return on ad spend (ROAS), conversion rates or lead sources. For example, if you got X number of leads from influencer marketing in the previous year, you can propose an X+10% increase in budget for the same activity this year.
Create internal benchmarks by platform and across all media channels to identify areas of investment that are not worth continuing. If you didn’t have metrics in place last year, now is the perfect time to implement them based on your company’s overall goals.
Do your research
You need to be aware of the market conditions to allocate the right marketing budget. Research how the market has changed since last year: Do you have the same competitors? What is your current brand perception? How has AI impacted the market?
Look for industry benchmarks to gain insights into what your competitors are spending on marketing. This will give you an idea of what your marketing budget should be.
Take a look at this representation of the percentage of revenue different industries allocate to marketing per a Gartner report:
Also connect with industry peers to learn how they’re managing their budget and keep close communication with your team about the results they’re seeing from marketing spend.
Such insights will help you identify new areas in marketing where you can focus your budget or refine existing ones.
Understand your team needs
When creating your marketing budget, carefully evaluate team needs, skills and the required resources necessary to achieve your marketing goals. This is important considering skill gap is a major issue in many marketing teams. A Gartner survey reveals a majority of CMOs find their teams lack the capabilities required to deliver their marketing strategy.
Compare your team’s existing skills with the skills required to execute your marketing strategies effectively. You can either address these skill gaps by providing additional training and resources for your team or hire additional team members, freelancers, consultants or agencies to fulfill specific roles—both of which will affect your budget.
Another important factor to consider when setting budgets is your team’s bandwidth. For example, your SEO team may aim to increase domain authority through backlinks. However, they may not have the time to reach out to the many sites required to achieve this goal. So, you must set aside a budget to outsource this task to a backlinks expert.
Get the bigger picture
You now need to see the bigger picture and set priorities.
Company goals are the anchoring points of your marketing budget. Consider both long-term and immediate goals—the former to get leads quickly and the latter as a growth strategy for the future.
The market research you’ve performed will also help you develop new goals and navigate old ones. There might be significant shifts in the market that push your strategy in a certain direction or internal changes that will influence your brand marketing strategy.
Next, you’ll need to create an estimate of the costs associated with different marketing activities. Take into consideration the cost of tools, resources, employees and contractors.
Check out industry reports or consult peers to get an idea of the range you would have to spend. The final step is to submit the draft of the marketing budget to stakeholders and seek approval.
Optimizing your marketing budget: 5 best practices
To navigate the current economic situation, some brands are investing in more resources. According to The State of Social Media 2023 report, 79% of marketers expect an increase in their overall marketing budgets in the next three years.
Let’s look at some techniques you can use to audit your current marketing budget and prioritize things that move the needle the most.
1. Remove siloes within marketing and sales teams
Oftentimes, sections of the marketing teams are functioning in separate bubbles. The advertising team may not know what the content team is doing and the PR team is unaware of what the customer marketing team is up to.
Getting teams to collaborate and find synergies between different channels can save money.
For example, when the teams focus on paid campaigns and SEO collaboration, they may discover that the website is already ranking organically for an expensive target keyword and there’s no need to bid for it. A holistic paid and organic keyword strategy like this can reduce your ad spend significantly.
Also making sure marketing and sales are aligned allows you to take better advantage of your budget. Sales needs to follow up on leads and marketing should be able to provide quality leads. Both sides should define and agree on what constitutes high-quality leads and create a handoff process so time is spent on nurturing quality leads.
2. Consider revenue
Regardless of the metrics you’re reporting on—pipeline, website sessions or conversions—in the current economic situation, it’s always best to base your budgeting decisions on the actual revenue that your activities are driving.
For example, an advertiser may think that a 1:3 ROAS ratio is fantastic. But if the company’s cost of goods sold is not considered, the company could still lose money despite the good ROAS.
Similarly, look into your current strategy and determine how to adjust your marketing budget based on what’s moving the needle for actual revenue.
3. Listen to customers
If you’re implementing multiple marketing campaigns but it’s not what your customer wants, chances are you’ll experience losses.
The best way to know where to put your money is by understanding and listening to your customers. Keep up with their changing needs and desires. Get to know how they are responding to marketing efforts. This will help you allocate the needed resources and help you invest in the right channels.
According to The State of Social Media 2023 report, 58% of business leaders believe that more effectively leveraging social media data and constantly adjusting social media strategy to the evolving needs of customers will give companies a competitive advantage.
It is clear that personalization and intuitive communication are important in marketing and are valued by customers. So, make sure you listen to your customers and understand their behavior.
Consider audience research as the starting point of channeling budget and resources so you gain the best returns.
4. Consider experimentation and contingency
In an ever-evolving market, marketing teams should be able to try, test and learn. Allocating money for this purpose may be difficult since it’s less certain but it can bring you the strongest outcomes.
Using a zero-based budgeting framework lets you focus on accounting for projected costs and performance outcomes for new initiatives where there isn’t past data to reference. It also helps assess reallocating budget for new initiatives or campaigns that come up after the budget has been confirmed.
Anything new brings risk, so you’ll need to justify each expense for its potential ROI and compare that to the ROI of existing campaigns. Thus, it allows business leaders to revisit, remeasure and reevaluate their marketing strategy. Then, leaders can decide if it’s worth pursuing or to stick with what they know works.
According to The Sprout Social Index™ 2023, 38% of consumers agree that the most memorable brands on social prioritize original content over following trending topics. And 26% agree that memorable brands take risks with their social content. This demonstrates the dynamic nature of the marketing landscape, where innovation and bold approaches are valued by customers.
Apart from this, it’s always best to have a contingency fund in place to make use of a golden opportunity that may unexpectedly come to your team.
5. Use the right technology
Including the right tech tools in every digital marketing budget is a no-brainer. More and more marketers are investing in tools and technologies to get the most out of their time and efforts.
Per The Sprout Social Index™, more than 80% of marketers say AI has already positively impacted their work, giving them more time for creativity (78%) and increased efficiency (73%).
Since one of the biggest marketing expenses is tech, you need to carefully consider new tools and maximize the value of your tech stack.
How do you make sure to spend wisely on tools?
One way is to invest in robust tools that offer multiple functionalities in one place and/or integrate with your existing tech infrastructure. This is potentially more cost-effective than paying for multiple individual tools as you maximize your budget while streamlining your workflows.
For example, Sprout Social helps you manage inboxes across social platforms, monitor and manage ratings, handle paid promotions and it integrates with other tools in your stack. Here are some of the marketing functions you can handle with Sprout:
- Marketing automation: Schedule content, funnel comments and messages into one social hub, generate shareable reports and track brand mentions.
- Reputation management: Sprout’s Social Listening capabilities detect a crisis early and enable you to identify unfamiliar trending words from customer conversations.
- Customer service: Build chatbots to handle customer support requests or direct messages to the right team. Our AI Assist functionality helps you write robust customer responses quickly.
- Business intelligence: Sprout helps you understand customer behavior and surface business-critical information from social channels with sentiment analysis.
- Powerful integrations: Integrations with other tools, like Salesforce, will enable you to access, share and manage data for 360-degree view of the customer.
You should complete regular assessments of your marketing tech stack before setting your annual marketing budget. Things might have changed and your go-to tool today may no longer fit your needs six months from now.
Marketing budget breakdown
When crafting a comprehensive marketing budget, enterprises need to consider various categories that cover both marketing talent and technology. Here’s a breakdown of the top categories to have in your marketing budget:
Social media marketing budget
A social media marketing budget typically includes allocations for various expenses related to running effective social media campaigns and strategies. You will need to assign a budget for content creation as well as ad campaigns in case you’re looking into paid marketing.
Marketing talent: Social media managers, community managers, paid media strategists, creative designers and video editors.
Marketing technology: Social media management tool, employee advocacy tool, project management tool and graphic design tool.
Here’s an article where you can learn more about social media budgeting.
Influencer marketing budget
This budget covers the funds allocated for collaborating with influencers to promote your brand, products or services. It will depend on what the influencers charge per campaign or if you plan to pay them based on referrals.
Other factors include how you plan to manage the influencers—from contract negotiations to collaboration to tracking performance. An influencer management platform like Tagger (which was recently acquired by Sprout Social) will help you do this more efficiently.
Marketing talent: Influencer relationship managers, content creators and creative editors.
Marketing technology: Influencer management platform and social media analytics tools.
Content marketing and SEO budget
This budget covers the funds to create high-quality content, optimize it for search engines and promote it to attract and engage your target audience across various platforms. It can also include public relations and executive communications to further support brand awareness and distribute content to wider audiences.
Marketing talent: Content strategists, SEO strategists, external communication professionals, content writers, editors and video producers.
Marketing technology: Content management system, SEO tools, AI writing assistant and website analytics tools.
Paid media budget
Your paid media budget should cover the expenses for the funds allocated specifically for setting bid strategies, ad placements and A/B testing.
Marketing Talent: Paid media marketing specialists, copywriters and graphic designers.
Marketing technology: Ad management platforms, conversion tracking tools, website analytics tool and social media analytics tool.
Customer marketing budget
This fund is for retaining and engaging existing customers, nurturing their loyalty and maximizing their lifetime value. It includes various expenses necessary to execute customer-focused marketing strategies effectively.
Marketing talent: Customer marketing manager, email marketing specialist and lifecycle marketing manager.
Marketing technology: Customer relationship management (CRM) software, email marketing platform, personalization tools and survey and feedback platforms.
By allocating resources to these essential categories and balancing marketing talent with technology investments, enterprises can create a robust and effective marketing budget that drives results across various channels.
Sample marketing budget
Here’s a sample marketing budget with percentages allocated to the different categories listed above:
- Social media marketing: 20%
- Influencer marketing: 15%
- Content marketing and SEO: 30%
- Paid media: 15%
- Customer marketing: 10%
- Resources:
- Staff: 5%
- Marketing analytics and automation tools: 3%
- Website development and maintenance: 2%
Here’s another sample marketing budget:
- Inbound content marketing: 30%
- Social Media Marketing: 20%
- Events and Sponsorships: 10%
- Influencer Marketing: 5%
- Email Marketing: 10%
- Paid advertising: 15%
- Miscellaneous (Contingency): 10%
To know more about the cost of social media management and the average amount a business should spend, here’s a detailed breakdown.
Investing in the right channels
Optimizing your marketing budget is a strategic initiative, which should be developed based on past experiences and analyzing what will work in the future. Investing in the right channels, like social media and technology will help you make the most of your marketing budget.
As you dig into the details of cost allocation, think about the ROI of social media and read our article to understand how you can optimize your marketing spend to improve your market position and propel your business forward.
The post How to optimize your marketing budget: Do more with less appeared first on Sprout Social.
