But while talking to clients this week, I heard several times the question: how do you actually put together a solid marketing budget for 2015? What are the guidelines for determining my overall budget? How do I divide my budget for outbound versus inbound?
Defining the right size of a marketing budget and allocating resources wisely has become an enormous challenge for senior executives as the line between digital and traditional marketing continues to blur. Marketing is becoming more complex as different marketing concepts are competing for resources and chunks of the budget.
While every business is different and there is no magic formula for creating an inbound marketing budget, there are some best practices that can help guide you in the process.
Define Smart Marketing Goals
Modern marketers often feel they are wasting half of their marketing budget, but don't know which one.
While marketing budgets are increasing, the money is invested in many different channels: website development, inbound marketing, paid search, print ads, TV commercials and the list goes on. This is the primary reason, why chief marketing officers are investing in marketing methods that enable marketers to measure and report return on investments.
According to the CMO Survey, CMOs spend 8% of their marketing budgets on marketing analytics, and expect to further increase.
But the best analytical platform cannot measure against fluffy goals. You have to set smart goals.
In the past, we have talked about the importance of setting smart marketing goals. Smart is an acronym and stands for specific, measurable, attainable, realistic, and timely.
For example, increase the number of marketing qualified leads by 10% in the next 6 months by executing 2 lead nurturing campaigns is a smart goal for some businesses. For others that might be too little or too high.
Think about what goals you would like to achieve in the next 12 months and then break it down. What do you have to achieve? What happens if you don't? Why did you pick that number versus a different number? Why that timeline?
Once you know where you are going, you can determine how to get there.
Set Your Marketing Budget
Even though many companies view inbound marketing as an essential part of their strategy, the eternal question exists: How much should I invest? How big should my overall marketing budget be and how much of that should I allocate to Inbound Marketing?
According to Gartner's CMO Spend 2015 Report, marketing budgets remain healthy at above 10% of the annual revenue. More than 50% of the respondents indicated they are planning to raise their marketing budgets in 2015 compared to last year.
The CMO Survey breaks marketing budget down by vertical and annual revenue:
Marketing Budget Guidelines by Vertical:
- B2B Product: 7.8%
- B2B Services: 7.5%
- B2C Product: 9.0%
- B2C Services: 10.4%
Marketing Budgets by Annual Revenue:
- Less than $25 million: 11%
- $25 million - $99 million: 7.3%
- $100 million - $499 million: 6.1%
- $500 million - $999 million: 3.7%
- $1 billion - $9.9 billion: 6.7%
- More than $10 billion: 11.9%
What should you spend your budget on? That really depends on how you generate your leads, your sales cycle and what your company is offering.
But two things are clear:
- Marketing salaries are rising. Retaining top talent is a key challenge in this competitive world and chances are that top contributors in your team have an extensive skill set around social media and content creation. The old rule of 40/60 for staff/programs has been turned upside down - so expect to invest in people (skill set) and then in programs.
- Inbound Marketing is effective. If your business offers non-commodity products or high-value services with a sales cycle longer than a week and you are using the internet to generate some leads, Inbound Marketing is the way to go for you. According to Gartner, more than 70% of businesses are stretching their spending's, reinvesting savings and justifying incremental investments to fund their digital marketing.
According to the State of Inbound Marketing Report, companies with a marketing budget of $100,000 or more tend to spend proportionally more on Inbound Marketing versus outbound marketing.
Look at what worked before
Lastly, but not least go through your spending the past couple of years.
What worked and what did not work? What had direct impact on your bottom line - what investments affected your business indirectly?
Attributing proper return on investment can be hard if you did not have smart goals in place or the tools to measure and analyze their impact, but it will give you an indication of what works well for your business and where to better not go.