Deciding how much marketing budget you need

Deciding how much marketing budget you need

Budgeting is an essential part of managing finances, both in our personal lives and in business. It involves allocating resources and setting limits on spending in order to achieve financial goals. However, there is a new approach to budgeting that is gaining popularity – backwards budgeting.

Backwards budgeting, also known as reverse budgeting or zero-based budgeting, is a budgeting technique that starts with goals and works backwards to determine the resources needed to achieve those goals. This approach challenges the traditional way of budgeting, which usually starts with looking at the past year’s budget and making adjustments.

So, how can this concept be applied to marketing? Let’s take a closer look at the basics of backwards budgeting and how it can be effectively used in marketing strategies.

1. Start with your marketing goals

The first step in backwards budgeting for marketing is to clearly define your goals. What do you want to achieve with your marketing efforts? Is it to increase brand awareness, generate leads, or boost sales?

It is important to set SMART goals – specific, measurable, achievable, relevant, and time-bound. This will not only help you stay focused, but also make it easier to determine the resources needed to achieve those goals.

2. Prioritize your marketing activities

Next, you need to list out all the marketing activities that can help you reach your goals. These may include social media advertising, email marketing, content marketing, SEO, event marketing, etc. Once you have a comprehensive list, prioritize the activities based on which ones are most likely to have the biggest impact on your goals.

3. Determine the costs

Now that you have a list of prioritized marketing activities, it’s time to determine the costs associated with each one. This includes not just the direct costs, such as advertising spend, but also the indirect costs, such as staff time and resources. It is important to be as accurate as possible in estimating these costs.

4. Allocate the budget

Once you have a clear understanding of the costs associated with each marketing activity, you can start allocating your budget. Start with the top priority activity and allocate enough budget to achieve your desired results. Then, move on to the next activity and allocate the remaining budget accordingly.

This process will ensure that your budget is aligned with your goals and that you are investing in the most important marketing activities first.

5. Monitor and adjust

Backwards budgeting is not a one-time exercise. It requires continuous monitoring and adjustment to ensure that you are on track to reach your goals. In marketing, this means regularly tracking the performance of your marketing activities and making necessary adjustments to your budget as needed.

For example, if you find that one of your marketing activities is not yielding the desired results, you may need to re-allocate some of the budget to a different activity that has shown better ROI.

Benefits of backwards budgeting for marketing:

1. Maximize ROI

Backwards budgeting helps you prioritize your marketing activities based on their potential to generate the best return on investment. This ensures that you are allocating your budget where it will have the biggest impact, resulting in a higher ROI for your marketing efforts.

2. More flexibility

Traditional budgeting often involves carrying over the previous year’s budget and making minor adjustments. However, this can lead to budget constraints and prevent you from trying out new marketing strategies. With backwards budgeting, you have the flexibility to allocate your budget based on your current goals and priorities, giving you the freedom to explore new ideas and tactics.

3. Better alignment with goals

Backwards budgeting starts with goals, making sure that your budget is aligned with your desired outcomes. This eliminates the risk of overspending on activities that are not directly contributing to your goals and allows you to focus on what matters most.

4. More efficient resource allocation

By prioritizing your marketing activities and allocating your budget based on those priorities, you can ensure that you are utilizing your resources efficiently. This can help you avoid overspending on certain activities and ensure that you have enough resources allocated to high-priority activities.

In conclusion, backwards budgeting is a holistic approach to budgeting that can be effectively applied to marketing. By starting with goals and working backwards to allocate resources, it can help businesses maximize ROI, gain more flexibility, and achieve better alignment with their marketing goals.

As with any budgeting technique, it is important to continuously monitor and adjust to ensure the best use of resources. Give backwards budgeting a try in your next marketing planning and see the impact it can make. 

Learning how to become more effective setting marketing budgets is just one topic we cover in the CMO Dashboard. From trainings, masterminds to reporting dashboards and lead projection calculators, the CMO Dashboard can help you better develop effective marketing budgets. Learn More >