HOW MUCH SHOULD businesses allocate BUDGET FOR MARKETING?
Marketing budget allocation varies from industry to industry. However, as a rule of thumb, businesses must allocate 6 to 20 percent of their revenue for marketing. Startups and small businesses must give 12 to 20 percent of their revenue.
Companies that have been around for more than five years can manage with a marketing budget allocation of 6 to 12 percent. However, a 2020 CMO survey suggests that the average marketing spend rose to 11.4 percent from 8.6 percent post the pandemic.
Why should businesses use a marketing budget calculator?
A marketing budget calculator helps businesses understand the ideal amount they should spend on marketing. Companies should use a marketing budget calculator for the following reasons:
- You get a fair idea of the perfect amount to spend on marketing.
- Depending on your business goals, you can select the time frame and generate an estimate.
- It helps you direct resources to specific areas of marketing.
- It gives you a clear plan to move your business forward.
WHY SHOULD COMPANIES UNDERSTAND THEIR customer ACQUISITION COST? (CAC)
Customer acquisition cost (CAC) is the money spent to acquire one customer. All the marketing efforts collectively contribute to the CAC from lead generation to the final purchase stage. Tracking the CAC is crucial because:
- It helps you analyze if the revenue generated by a customer is worth his acquisition cost.
- Identify the most effective marketing channels for your business (lower the CAC, more profitable the marketing channel) and allocate more resources towards those channels.
- Evaluate if your business is operating sustainably.
- If your company is looking to onboard investors, CAC is one of the first metrics they look at to determine if your business could be profitable and investable.
Without tracking the CAC, your marketing campaign would be like shooting in the dark. You can bleed money very quickly, and you won’t know how and when your business is failing.
What if I am currently spending more than the marketing budget calculator estimates?
A marketing budget calculator gives you a fair idea of how much money you need to spend depending on your industry, revenue, and business size. However, if you are currently paying more than recommended, you must evaluate if the extra spending generates tangible results for your business.
If the returns are not proportional to the extra expenditure, it would be advisable to stick with your budget calculator figure. You can increase or decrease the budget allocation towards different marketing channels, tactics, and audiences but make sure you don’t exceed the total marketing budget.
How to choose digital marketing channels for your marketing plan?
70% of businesses spend more than half of their marketing budget on digital marketing. Investing in the proper channels to harness the power of digital platforms is essential. The five steps to choosing online marketing channels for your marketing plan are as follows:
- Familiarize yourself with different digital marketing channels
- Define the goals you intend to achieve through digital marketing
- Understand where your audience is the most active
- Learn the costs associated with each marketing channel
- Prioritize investment in those channels that directly contribute to the accomplishment of your goals.