The start of the new financial year is the ideal time for businesses of all sizes to establish a marketing budget for the coming twelve months.

A dedicated marketing budget is essentially a comprehensive list of all money you will allocate to your marketing efforts. Formalising your marketing spend in this way is vital to tracking and measuring your return on investment [ROI], and ensuring your budget is only going towards the most effective activities.

Robert Konzon, Director of Finance at Climb Online explores the key considerations for creating an effective marketing budget in the new tax year.

Set objectives

Your budget and marketing strategy are two pieces of the same puzzle, so it’s crucial to know what you want your marketing efforts to achieve for your business before you start creating a budget.

Perhaps you want to focus on your paid ad strategy, and improve the click through rate and lead generation of your ads, or boost the visibility of your website in the search engine rankings through an investment into SEO and content. Your particular aims will be dependent on your current business goals, as well as the types of marketing activity that have historically produced the best results for you, but whatever your goals are, it’s important to properly define them.

Creating well-defined objectives with measurable KPIs and definitive time-limits will build a picture of where you will need to allocate marketing budget.

Research costs

Having established your marketing objectives, you can begin quantifying how much your chosen activities will cost you. It’s important to really get specific when researching costs, as the more detail you can include in your budget, the better.

Working closely with your marketing team or agency is also vital to building a full picture of how much a campaign or activity will cost, as well as the effects of increasing or decreasing your spend on a particular channel, such as with a paid advertising campaign.

There are a multitude of digital tools that can help you research and keep track of this, such as Google’s keyword planner tool, which offers a good indication of the costs associated with running an ad campaign.

Allocate spend

There is no hard and fast amount that should be spent on your marketing. It will depend on several factors including the size and stability of your company, your market position, and your particular marketing aims. However, taking time to understand your sales funnel as a whole is a key component in allocating an appropriate level of budget towards various marketing efforts.

Your marketing activities should be supporting each stage of the customer journey, from initial awareness through to interest, and finally to driving purchasing action. Understanding the flow from one part of the sales funnel to the next, and how this fits into your own marketing aims is key to allocating budget effectively.

It is also useful to bear in mind that your budget does not have to consistent for each month or even quarter of the year. Many businesses, particularly ecommerce and retail businesses, may experience seasonal peak periods and other times where activity is quiet. Planning your allocation of spend in line with these peak times is crucial for making the most out of your marketing your most profitable times.

Track ROI

Once you’ve established your budget, it’s essential to monitor your activity and track its return on investment. Regularly reviewing the ROI of marketing activities is necessary for ensuring your budget is being spent in the smartest way possible. You should be measuring your marketing efforts against total revenue and net profit to identify those that are giving you the biggest return.

Tracking ROI can be tricky when it comes to marketing activities, so its necessary to ensure you have a robust reporting framework in place. This not only allows you to track the efficacy of your campaigns against how much you’ve spent on them, but it also provides insightful data for informing your marketing activities going forward. Similarly, leveraging the analytics and data from your marketing platforms, such as Google Ads, ensures your spend is being funnelled into your most profitable campaigns, and guards against overspending.

Final thoughts

Your marketing budget is an essential part of your overall marketing strategy, and should be one of your key considerations as we move into the new financial year. Establishing a budget that is in line with both your goals and resources allows you to make the most of your most profitable activities and periods, while setting out a roadmap that makes it easier to adapt to changes and take control of your spending.