Every business knows the importance of their bottom line; that is, predicting, controlling, and achieving a profit. Like your overall budget, your Marketing investment must be well planned out, not just a randomly chosen number. To achieve this, you must understand the costs and risks that you will face and the investment areas and actions that will provide the greatest opportunities.
So, the main question is: how can you control and plan your company's budget? You already know that it can often be difficult to identify expenses and measure them correctly. In this post, we share 10 basic but important aspects in getting a better grasp on your Marketing investment so you successfully keep it on track and on budget.
While every company has different circumstances, strategies, costs, and investment potential, there are still some guidelines that every business can follow to plan and maintain their Marketing investment.
According to a CMO Survey, marketing budgets usually make up between 7-12% of total revenue. That's a lot!
In order to obtain a complete vision of where you want to invest your Marketing dollars, you need to figure out the place of Marketing in your general budget and strategy. The general budget will detail all the company's investments, including business development, sales, IT, etc. and the specific budgets for each area.
By analyzing the overall budget, you may see that some areas overlap or investment in Marketing can be maximized by combining efforts with another department. Within your specific budgets, you can break down the actions necessary, track their success, and optimize or eliminate the underperformers.
Before even starting, you should assign the exact investment figure that you're going to make in each of your Marketing campaigns. This should not be an approximate figure; rather, you should research the budget you'll need to carry out each campaign based on your previous experience and costs. Keeping this figure in mind, you'll prioritize only the actions that fit into your budget and avoid unecessary or unknown expenses.
For example, in your paid media campaigns on Google or Facebook Ads, you can take your budget from last month or last year and decide whether they had an effective ROI (Return on Investment) that you'd like to continue. For social media or content marketing campaigns, you can do the same, though determining exact ROI may be tougher for soft metrics like views and shares.
Experts agree that we should adopt budgetary rules that give us some room for flexibility and innovation. A good way to do this is via the 70/30 rule: 70% of the budget will be allocated to the fixed costs of Marketing, while 30% will be allocated to variable expenses.
The 30% can be used to experiment, do A/B testing, explore new markets and avenues, or increase innovation. In the event that you do not use that 30% completely, you can save it for later or add it back into the other 70%.
As you should already know, ROI (Return On Investment) is a metric that determines the profit obtained from an investment.ROI is a fundamental tool when it comes to controlling your marketing investment, as it allows us to measure, analyze and make decisions.
Also, according to HubSpot, 35% of marketers said that understanding the ROI of their campaigns is "very" or "extremely important."
To calculate ROI, it's necessary to know sales numbers and company costs.The formula is as follows:
ROI = Net Income / Cost of Investment x 100
To obtain a positive ROI, and to make sure it's as high as possible, follow these best practices:
Average Ticket = Gross Turnover / Sales Volume
Average ticket = Total sales / Number of customers
How can I increase the average ticket?
Creating a budget with outdated information certainly won't help you maximize your investment in Marketing. Therefore, when calculating expected costs, make sure you use the latest figures or estimates, as well as the most recent data from your own company. It is highly recommended to make a budget forecast, keeping track of the state of your expenses at all times. This will help you avoid excessive spending, know when your under- or over-budget, and see how/where to redirect resources.
Reconciliation is the process of classifying the expenses that have been made in the different budget items. In order for your financial department to close the month, quarter, or year, it needs to receive certain information from the Marketing department.This information should include a list of all classified expenses that the department has incurred throughout each period.
According to Plannuh, 26% of companies have never carried out the reconciliation process. That's shocking. Of those companies that have done it, this process can cause a big headache, so it is very important to have an automatic reconciliation tool; you don't want the chaos and disorganization that can come from different files, spreadsheets, and reports. Our advice: do reconciliation frequently, every two weeks for smaller businesses and up to daily for larger companies.
Stakeholders are critical to the success of your Marketing efforts. Each stakeholder will want to analyze specific metrics within the budget. What's more, according to HubSpot, 75% of stakeholders use their reports to show how campaigns have a direct impact on revenue.
The best way to structure your budget proposals for different stakeholders are as follows:
There are endless tracking tools like Jira, Confluence or Google Drive.Investigate these tools well and make surethat your entire team actively uses it throughout the year.
By investing in the latest technologies you will not only increase your productivity, but reduce costs (such as time or personnel) and increase your income, making the growth projection much higher to be able to compete nationally or internationally. Regardless of size, companies must avoid outdated practices of multiple tools, platforms, and the dreaded Excel sheets.
There are tools like NetSuite or Sage Business Cloud, which help us keep track of the profits that we are generating with each activity, and adapt our budget. Marketing automation platforms like HubSpot allow you to not only house all of your content and contacts, but report on metrics like ROI and attribution. With so many Marketing platforms to choose from, how do you decide? Check out our comparison of HubSpot vs. Marketo and HubSpot vs. Pardot.
By partnering with a specialized Inbound Marketing Agency you can reduce the costs of your company; you'll pay only for the services you need, when you need them. You'll finally be able to take advantage of opportunities that you didn't have the proper expertise for before.
Additionally, by outsourcing your Marketing, you'll save on resources since your company will need less personnel, freelancers, office space, computer equipment, etc. Employee reduction, in particular, can result in big savings, and with an agency like mbudo you'll be guaranteed dedicated support, a wide array of Marketing servuces, and high-quality results. Discover more advantages of hiring a Marketing agency.
As you can see, there are many easy ways to control your Marketing investment, so there's no excuse in not making budget adjustments today! How will you benefit? You'll achieve greater security in your strategy, reduce risk and waste in expenses, and prove the value of Marketing to your business. Moreover, you can make better decisions for the future. For help in all things Marketing, contact mbudo.