What is a marketing budget and how do you plan it?

Marketing is a significant tool in business, but it’s also not something that everyone can manage successfully or even understands.

By Craig Falck for Africa Report
Photohraph: © Tom Wang | Dreamstime.com

Marketing is defined as how you promote your business, service or product. These days, there are so many different ways to do marketing… there’s television advertising, radio advertising, pamphlets and other hand-outs, print advertising, in-store promotions… the list is endless. But that costs money. So how do you determine your marketing budget? With these tools, of course.

The most common budget-determining method is by using a percentage of revenues. Basically, you decide that you’re going to spend 10 percent of your business’s revenue stream on marketing. If you do R1 million in revenue, you’ve planned to spend R100 000 on marketing. If you have revenue of R5 million, you’ve allocated R500 000. The problem with this method is you can’t just decide what percentage to work at – you won’t get it right the first time and it’ll take a few tries before you find the perfect number.

You might find that you want to spend every single cent you have on marketing. Obviously you need to keep the business running so you’ll allocate funds for company operations and put them one side, but other than that all the money gets spent on marketing your company. It’s a very risky model to use and not one we’d recommend, especially for smaller businesses.

Spending what your competition is spending is another option; the only problem being that you’ll never, in a million years, find out what they have spent on their marketing campaigns. You can bring analysts or experts in marketing in and consult them – they will assess what your competition’s spent and provide their estimates and you’ll be able to work on those figures. You can either decide to match that or perhaps spend a little more, but at least you’ll have comfort knowing that you’re not spending $1 for every $10 that they’re spending.

The last model we’re going to look at is objective-orientated marketing. You have an idea of what kind of marketing you want to do, and then you have those priced and you can see whether you can afford them or not. It’s not the most ideal model to use as you might want to use a specific medium and the pricing knocks you out of the running from the get go. You might be surprised, though, and be able to afford a lot more than you thought.

Marketing your business is important. It gets your name into the marketplace and onto people’s tongues. But to do that, you’ll need to spend money. It’s time to budget for your marketing.