How to plan your marketing budget

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Planning marketing budgets is hard.

Figuring out how much money you should allocate to drive new customers to your business isn't easy, even at the best of times. There are a lot of considerations in play.

To clarify things, we recommend you take a systematic and focused approach to growing your businesses.

We call it The Focus Formula because, well, marketing! 😉

In the great words of Stephen Covey, you have to "start with the end in mind".

So, when looking at your budgets, there are some things you want to know about your current digital marketing:

  1. Website traffic

  2. Average conversion rate to a sale; or from a lead to a sale (CVR)

  3. Number of leads

  4. Number of sales

  5. Average order value (AOV)

  6. How much money you’ve spent on marketing

  7. Cost per lead (CPL) - budget/leads

  8. Cost per sale (CPS) - budget/sales

  9. Where you feel you're losing people through your marketing and sales funnels

To go deeper, you can look into the above on a channel basis, but let’s keep things simple for now

We recommend you look at 6-12 months of data to account for seasonality.

There are lots more questions you can ask, of course. Still, with the answers to these, you should be able to tell what revenue your current website is driving and the budget you may have to spend on fixing whatever challenges you're facing, assuming they're fixable.

For example, let's say your business is making ÂŁ30k in revenue per month, and you want to grow that to ÂŁ50k per month.

You have a shortfall of ÂŁ20k per month. And, let's imagine your average client is worth ÂŁ2k per month.

You need to figure out exactly how to get the extra ÂŁ20k... by working backwards from where you want to arrive.

You'll need an extra 10 clients per month to hit that target.

Next, you want to decide how long you need to hit that target.

Let's say you want to get there in 6 months.

So, you'd need 1.66 new clients per month. In the spirit of optimism, we’ll round that up to 2 a month.

2 new clients per month, or 1 new client every 2 weeks.

From there... you have to assess how many new leads you have to get to land 2 new clients per month.

Suppose your average lead-to-conversion rate is 20%. You need to get 10 leads per month and convert at least 2 into new clients. If your conversion is better than that, you need fewer leads. If it's less, you need more. Adapt the numbers based on your unique conversion rates.

Now you know how many leads you need, and you know how many sales you need.

Next, you've got to figure out how much traffic you have to drive to your landing page(s) to get you 10 highly-qualified leads.

How does your lead generation activity usually convert? What percentage of traffic goes on to download your offer?

With this information, you can estimate how much you have to spend to 'buy' that traffic... Google, Facebook, LinkedIn, etc., have tools to help you do this.

You will also need to price up the investment required to create the content and assets you’ll use to deliver the marketing.

Once you’ve gone through this process, you can take a far more systematic and focused approach to working out your digital marketing budget based on what you need to spend to meet your objectives.

This is value-based planning. Budgeting is then based on the value you will provide your business and not on the amount of time it takes you to do the work.

P.S. For an even more straightforward way to figure out your budget, ask yourself how much you think is reasonable to invest in driving revenue. For example, is it realistic to expect to pay ÂŁ10 CPL if your AOV is ÂŁ15,000?

Some industry sources say that CMOs allocate around 12% of their annual revenue to marketing. This can be dialled up or down, according to your circumstances.

 

Need help planning your next campaign?

Download your FREE Campaign Planning Workbook to accelerate your marketing!

 
Neil CainsComment