Budgeting and Planning for 2014

Around this time every year, marketing executives start revisiting their plans and budgets. The thing that makes 2014 different from any other new year planning cycle is the fact that there are more media options available today than ever before, making it difficult for marketers to know where they should be focusing their time and resources in order to maximize their effectiveness. Here’s what marketers need to do to budget and plan effectively in today’s business environment.

How much should I budget?
Marketers everywhere are searching for a hard and fast rule for determining how much they should budget for marketing. I recently spoke with a CMO from a small company that does a couple of million dollars in annual sales. He’d heard about a rule of thumb that said marketing budgets should equal about 10 to 15 percent of annual sales. These numbers can provide a good starting point for CMOs like the one in this example, but the truth is that each CMO must decide their annual marketing budget based on what’s most important for their business.

I’ve worked with well-known, multibillion-dollar companies that spend next to nothing on marketing. On the other hand, I’ve worked with startups that spend big-time money on marketing, in spite of the fact that they have limited capital and no sales numbers to speak of. These two companies have completely different marketing objectives: startups often need to spend a much higher percentage of their funds on marketing, because they have no brand recognition. More established companies can often rely on a built-in audience of their existing customers who don’t have to be re-targeted every time a new product or service comes out. It makes sense that the two companies in this example would throw the 10 to 15 percent rule out the window.

Know your potential buyers
Defining your audience also plays an important role in determining how much you’ll need to spend in the upcoming year. For instance, if you were trying to launch a new consumer product, your target audience would be anyone with the disposable income to buy your product. You might try to reach this audience using TV infomercials. They can meet your goal of putting your product name into households across the country, but they also don’t come cheap, so you would have to budget accordingly.

However, if you worked for a niche B2B technology services company, your target audience would be much smaller: a handful of analysts and key influencers. Reaching that audience may be as simple as targeting a few trade publications and bloggers. You could probably get away with budgeting a lot less than a company that needs a mass media consumer campaign.

Define your objectives with the 5 Ws
We’ve established the fact that understanding your company’s objectives is important to setting a marketing budget, but what can CMOs do to help define those objectives? I recommend they start by asking themselves the 5 Ws:
• What are we selling? Is it a well-known product or service, or will we be building brand recognition from scratch?
• Who are we targeting? Who are the potential buyers for our product or service? Are they already familiar with our company?
• Where can we reach our target audience? What types of media do they consume? How do they make purchase decisions?
• Why will our marketing plan work? Do we have market research or historical data we can draw from to prove that our ideas will be effective?
• When do we need to launch our marketing plan? Is our offering seasonal, or tied to a major event?

These are just a handful of the questions CMOs can take into consideration in order to build the most cost-effective marketing plan possible. Planning and budgeting for marketing isn’t easy, but it’s important that you get your strategy right before you start working with an outside advertising agency, public relations firm or any type of marketing company. Marketing experts are also available if you feel like you still need some extra help setting your budget and figuring it out.