Marketing Budgeting 101: Planning Your Budget for 2024

nextcmo25 Jul 2023
Community: The Next CMOThought LeadershipUncategorized

For every great marketing plan, there is a budget set. When building a marketing plan, establishing and developing your budget is important – but how you go about setting a budget amount that is appropriate for your plan is not always easy. 

How do marketers set their budget for a marketing plan? In this article, we break down the importance of marketing budgets and outline how to develop a budget for marketing plans, including the factors that go into determining your budget.

 What is a Marketing Budget?

First things, first: what is a marketing budget? To put it simply, a marketing budget is a specified amount of money invested in a marketing plan or campaign, used by an organization or brand. 

High-level marketing budgets typically include costs for all channels, whether it be advertising, social media, or organic search. A budget for a marketing plan can also cover tools and software, outside expenses like agencies or contractors, and other costs.

Investing in digital marketing will acquire more customers to buy products or services and bring in revenue to grow your business – however, it’s important to establish the right budget. For every new marketing endeavor, the first consideration to focus on will be the cost. Planning for your marketing budget will not only help you grow revenue but will help increase ROI.

The Importance of a Marketing Budget

It can be challenging to stick to a budget, but in the long run, your marketing budget will keep a grounded approach to your marketing. 

Why is it important to develop a budget for your marketing plan? Here are some reasons why it’s essential to set marketing budgets.

Stay on track 

A budget helps businesses stay focused and on track. With a budget, your marketing dollars are tracked to ensure that money isn’t being wasted – instead, your dollars are strategically spent on

campaigns and channels that are most successful. You can measure actual dollars spent versus the estimated amount budgeted. 

Invest in your business

By spending on marketing, you are investing in your business. A budget helps marketers establish how much is needed to strategically invest in order to see the desired return – your marketing return on investment (MROI). 

Set benchmarks 

Having an established budget can help you determine benchmarks. What estimate do you need to spend in order to hit your marketing goals for the year? Developing a marketing budget is an important step to meet those goals. 

Plan for the future

Budgeting can fuel long-term growth. Setting a budget for the upcoming year can pave the way for your annual budget moving forward. What goals do you want to hit several years from now? Setting your budget for the upcoming year can also help you plan and forecast for future years. 

Planning Considerations for Marketing Budgets

When creating a new marketing plan, part of that plan is determining a budget. But how do you know what your ideal annual budget should be? What is considered enough of a budget to reach your goals and get the expected ROI? There is no simple or straightforward answer, which is why preparing a marketing budget can be so tough. However, there are several factors that should be used to set the appropriate marketing budget needed for your business. 

Here are a few tips and considerations on putting together a marketing budget proposal, and determining the marketing budget that is appropriate for your business or organization.

  • Align your marketing efforts with business goals
  • Pick the best marketing strategies
  • Understand your operational marketing costs
  • Know the sales cycle of your business
  • Analyze past performance
  • Factor in the competition
  • Plan for marketing budget allocation

Align marketing with your business goals

Part of determining the amount to spend on a budget is to align your efforts with your business goals. Once business goals are estimated, you can create a marketing plan to support those milestones. Part of creating a budget proposal is knowing the amount of capital needed to reach  or exceed those goals.

Pick proven marketing strategies

Not every marketing strategy is going to be effective for a particular business. When you find the best marketing strategies to invest in, the budget for each channel or campaign is important. When you have an understanding of marketing ROI for strategies, you can factor that into your new budget.

Understand your operational marketing costs

When putting together a marketing budget, knowing operational costs is essential. Marketers should know what they need to spend their budget on, and whether there are outside expenses. Many organizations will work with external consultants or agencies, and leverage marketing tools, software, or platforms.

Know the sales cycle

The breakdown of your budget proposal will depend on the sales funnel. For your organization, the sales funnel will determine how you spend and allocate your budget to different channels and campaigns to ultimately convert leads to customers.

Analyze past performance

You can use past performance to help with future projections. Historical data should be factored into your new budget. Ask yourself, in prior years, how well did you track and manage your budget? For example, in recent years, did you overspend or underspend on your marketing budget? This is all essential for marketers to know.

Factor in the competition 

In addition to knowing your company’s past performance, it’s also important to have a general sense of competitors, and how much they are spending on marketing. Important questions to focus on when it comes to your competition are:

  • Have your competitors invested more in marketing in recent years? 
  • Are there new companies that have emerged in the industry?
  • Where is the market going? 

Investing in marketing can help get ahead of your competitors. Marketers should factor in the competition when planning budgets, and the amount needed so your organization doesn’t fall behind. Ultimately your budget could affect your performance versus the competition.

To learn more, check out our article on how much to spend on marketing.

Plan for budget allocation

With any marketing plan, you’ll need to allocate your budget. This means knowing what marketing activities to spend your money – and how much to spend – to get a return on investment. 

In addition to your marketing expenses, knowing the channels to allocate that is best for your business, including social media, advertising, public relations, and content marketing. For example, if historically you’ve found that an advertising campaign has attracted new qualified leads, you may want to allocate more for advertising and media.

How should you allocate your budget? For more guidance on this, we suggest reading our article on marketing budget allocation for more information and best practices.

Create a Budget for Your Marketing Plan

The marketing planning process is not easy. It’s important to take the time to plan your budget to prepare for a formal budget proposal. When you strategically plan your marketing budget, your efforts will be more successful. And that sets the table for generating more revenue through an increase in the sales of products or services.

Ready to get started planning your marketing? Check out our free online marketing plan builder to help you get started building out your plan. It contains all the fundamental plan elements to help stimulate ideas.

Planful is a leading marketing planning software for CMOs and marketers to build detailed plans to accomplish key goals.