Some people think of marketing as an expense or unavoidable cost of doing business. It’s true that marketing appears as an expense item on an income statement. But if we treat marketing expenditures and the resulting activities as investments, with a focus on Marketing ROI, we can better demonstrate their impact on the business.
There is no set percentage of revenue that should be spent on marketing. It really depends on many factors including: available funds (start-ups may want to spend more but have limited resources), type of market (consumer or business), maturity of the market, scope (size of market opportunity) and competitive position. In all cases it’s not just how much funding is available but how effectively those funds are used.
When developing a marketing budget you must have specific objectives to guide spending allocation. Marketing budgets cover many different areas. Some activities yield more measurable outcomes than others. If an activity cannot be tied directly to revenue or profit, it should nevertheless be measured against specific, quantifiable objectives that ultimately support revenue goals.
Some questions to consider when setting and justifying a marketing budget include:
A marketing budget is intended to fund the execution of a marketing plan. An important tool for managing the marketing plan and ensuring acceptable Marketing ROI, is by setting Key Performance Indicators (KPIs) for each budgeted activity. Marketing KPIs should be agreed upon with impacted functions (like Sales) and tracked diligently. They should be reviewed regularly to ensure they remain relevant, attainable and impactful.
Tracking KPIs contributes to a dynamic marketing plan by triggering mid-course corrections and contingency plans as part of a 4 step process:
Some say that marketing is an art and not a science. Historically that may have been true, however the long term health and growth of an organization requires that marketing has a positive, measurable impact. The more we monitor the attainment of objectives as we progress, and improve our forecasting of cause (expenditure) to effect (outcome against objective), the more of a science marketing becomes. In this way, marketers are both accountable and credible, and marketing ROI truly becomes king!