Click here if you missed part one of “Developing a Marketing Budget for 2012.”
How much should I budget for marketing?
This is the big question and one we get a lot. Typically marketing budgets are measured as a percentage of sales. The percentage will vary by industry. Both the Counselors to America's Small Business (SCORE) and the U.S. Small Business Administration (SBA) define the variable for a proper marketing budget to be between 2% and 10% of sales, noting that for B2C, retail and pharmaceuticals can exceed 20% during peak brand-building years. What I typically do is evaluate what was spent last year, determine effectiveness of the programs, the estimated return on investment for the program and what needs to be done. I then build the budget up and compare it to last year’s budget and sales.
Approving the marketing budget
Effective marketing teams create a summary of past programs to showing management what has worked and what has not. They outline their budgets in terms of potential sales growth. And, they show the return on investment calculations for the upcoming year’s programs.
For example, an estimated value target, in terms of sales, should be developed for each budget item. The value target is the estimated sales required to breakeven on the marketing program expense. You should work with your account team but this value could be developed by determining the gross profit margin on sales for company or product being promoted sales. Is the estimated growth rate valid?
Need marketing budget assistance?
We would be pleased to offer you a free, one hour assessment of your marketing plan for 2012. Contact our strategic marketing planning consultants at 440-449-6800 or use our contact request form, and we’d be happy to provide suggestions on your upcoming programs and budgets.