Crafting an annual advertising and marketing budget for a business can seem tricky if it’s your first rodeo. Many business owners make the mistake of jumping into creative processes and media placement before they’ve even identified what, specifically, they hope to get out of. If you don’t have a crystal clear picture of where you want your business to be by December, you’re going to end up with empty pockets and a bucket of disappointment.
The starting point for any annual ad and marketing budget strategy should always include the following steps:
1. Specify your annual business goals.
What does your company want to accomplish through advertising in the coming year? Do you want to increase brand awareness? Are you looking for more engagement with users? Or maybe you just want to increase ROI. Knowing what end result you’re looking for can help dictate how and where to spend your precious ad dollars.
2. Determine the amount of money you have available to spend.
Once you know what you’re aiming for, it’s time to sit down and analyze your budget. How much money can your company realistically allocate to marketing and advertising? For reference, the U.S. Small Business Administration recommends spending at least 7 to 8% of your gross revenue for the year on advertising. This number combined with your yearly goals will ultimately lead you to what services you can afford and should pursue.
3. Identify your target audience(s).
Know your market. Who are you trying to attract? What do they like to do? Where do they spend their money? How can you best get your advertising in front of them? What types of placement would best accomplish your goals for the year? This is a great discussion to have with your media buyer or advertising agency.
4. Align your budget and yearly goals.
The objective here should be to breakdown your budget into the necessary marketing “buckets” required to meet your goal. Keep in mind that, in the event your budget doesn’t allow for all the services you would ideally need, you will need to decide which services are top priority. This is a good time to decide if your budget allows for A/B testing and market research.
5. Aim for the 80/20 split.
Your media spend should always eclipse your creative budget by a good margin. After all, what’s the use of having a beautifully designed ad if no one sees it? A good standard to buy by is the 80/20 split – that is spending only 20% of your total budget on creative while allocating 80% to media placement.
Following these five steps, you and your marketing team should have the resources you need to create an effective budget strategy for the year. For more tips and marketing questions, drop us a line!