Set a marketing advertising budget
Set a marketing advertising budget
1. Align with your leadership team on advertising goals and your company's unique financial situation, while keeping advertising benchmarks in mind.
If your organization is just getting started with advertising, benchmarks can be useful. As a rough starting point, many companies set aside 2-5% of revenue for advertising. However, treat this is a starting point. Google [your industry] advertising spend as another starting point for your research. Since every company is in a unique situation, work with your leadership and finance teams to understand the expectations for advertising spend.
2. Determine the type of advertising budget model that works best for your company.
Choose between these basic options: A fixed-price budget based on a set number or as a percentage of sales. For a fixed-price budget, a good percentage is around 6.9% for B2B and 8.4% for B2C. An objective-based budget, in which you set a goal, figure out how much revenue it will bring in, and set your budget as a percentage of the goal. A related model is cost-per-acquisition. A budget based on what your competition is spending.
3. If you're using a CPA advertising model, work with your finance team to set a max allowable CPA.
A max allowable CPA helps marketers understand the maximum allowable number of average dollars it takes to acquire a customer, factoring in the lifetime value of a customer, average account size, and payback period. Since your CPA will decrease over time as you optimize your campaigns, also work with your finance team to set a reasonable timeframe during which you will produce sales at less than the max CPA, and an experimentation budget.
4. Conduct competitive research to understand the types of advertising and ad budgets your competitors are using.
Understanding the types of advertising campaigns and estimated budgets for your competitors is another great benchmark to help you triangulate an ad budget for your company. Use tools like Google Ads, SEM Rush, and Ubersuggest to estimate your competitors’ metrics.
5. Build a learning phase and ongoing testing into your advertising budget.
When you begin to run ads, you likely won’t get things perfect right away. It’s important to build in a learning phase during which you expect a lower ROI, and not it’s not uncommon to spend 6+ months in this phase. On an ongoing basis, even after you’ve dialed in your ads, you’ll want to reserve some percentage of your ad spend on ongoing testing.
6. Track and reassess at least weekly with a budget tracking tool or a spreadsheet to track revenue from each ad campaign and platform.
You can then both adjust your budget and drop ineffective channels and campaigns, and monitor for anomalies to ensure you stay within budget.
7. Monitor engagement to prioritize your marketing spend on the most engaging platforms.
Follow trends, especially ones that impact your target audience, by using Google Trends or social media monitoring tools like Hootsuite or TweetDeck. Adjust channels and budgets to reach your audience where they are interacting most. Keeping up with trends and user behavior will allow you to stay relevant in your industry and in social media.