Knowing how much to spend on marketing can be difficult, especially if you’re a startup with no historical data on which to base your decision. With so many diverse ways available to reach your audience these days, it’s also challenging to identify the best marketing methods. So where do you start in this process, and how do you ultimately decide how much money to budget toward your marketing efforts?
Considerations for a marketing budget
A number of factors need to be considered when estimating a marketing budget, including:
- Your stage of business
- The market share you’re aiming for
- Whether your market is B2B or B2C
- Your industry
- Size of the competition
- Whether you’re selling products or services
- If you plan to launch new products or offer fresh services on a regular basis
Every business has differing needs and goals, but a major factor dictating how much budget to allocate to marketing is the level of competition. If you operate in a sector with high competition, for instance, you’ll need a larger budget just to take or retain your planned market share.
Is marketing an expense or an investment?
However much you allocate to marketing, it’s definitely an investment rather than an expense. Some businesses make the mistake of cutting back on their marketing efforts during leaner times, but consistency is key when attracting customers, and most importantly, in retaining them.
Research, track and measure
It’s not always easy to accurately track and measure the success of a marketing campaign, but with digital marketing, the data is literally at your fingertips. Tracking and measuring allows you to target the methods that achieve best results, allocate greater resources, and ultimately increase your return on investment (ROI).
Consider a customer’s value over time
When calculating how much of your budget to invest in marketing, a key element is how much, on average, a customer will be worth to the business over time. This approach places greater importance on your ROI rather than the initial outlay, and it’s worth trying to estimate this as accurately as possible.
If repeat customers aren’t a feature of your business model, you can incorporate this type of expanded thinking into your calculations by planning cross-selling and up-selling exercises of your goods and services.
The idea that “you have to spend money to make money” is very appropriate to marketing. How much you need to spend to make sufficient impact on your target market varies, however, and new businesses won’t always be able to follow the lead of their more established competitors.
There’s really no one size fits all budget. They differ greatly between startups, and vary according to how quickly a business needs to grow. Whether this process is to be expedited or developed at a slower but potentially more sustainable rate is unique to your startup’s goals.