Setting or negotiating a marketing budget can be a rather odd experience.
For some reason, the good sense that most of us apply to budgeting and setting goals in our own personal lives is often overshadowed by corporate mandates, historical practices, time constraints, or just plain laziness. If you’re an entrepreneur, you may not have a frame of reference to use in either the establishment of budgets or selection of tactics.
A basic undergraduate course in marketing strategy will discuss the most common ways to budget: percentage of sales, competitive parity, affordable method, and objective/task, among others. The reality is that most companies use a mixture of these techniques to arrive at a budget or several mini-budgets.
The soundest technique is objective/task, which forces you to actually identify what you want to achieve and then plot out what it will take to get you there. Using the objective/task method is fairly straightforward. You first identify the business objectives you wish to achieve from your promotion. These may be a subset of objectives from your launch plan (such as a revenue or sales volume goal) or they may be smaller objectives that each support the attainment of a larger launch goal (like the number of subscribers for an e-newsletter or sales emanating from specific channels).
Here is an example of how you can build each element of your plan from the ground up:
Say that your goal is to achieve $6,000 in sales directly from email campaigns. Next, you’ll have to gather information about the available universe of recipients (either from your own list or working through third-party opt-in lists). Then, you can overlay some benchmarks and assumptions based on your own data or outside industry information. Conduct a calculation similar to this example:
| One email blast | 10,000 recipients |
| 10% open rate | 1,000 |
| 4% click through | 40 |
| 5% make a purchase | 2 |
| Typical purchase value | $300 |
One email blast should yield revenue of $600.
Given your revenue goal of $6,000 from email campaigns, you’ll need to do 10 blasts to reach your target. If each blast costs $300, then you’ll need a marketing budget of $3,000.
This is not a science, but when you build up your budget this way, it gives you a better window into what level of investment may be required to achieve your objectives.
At this point, you will probably either be trying to fit your plan into a budget that was given to you to work with, you will be asking for your proposed budget, or you’ll be deciding for yourself if you can afford what you think is required.
If your projections are making you squirm a bit, it’s time for a reality check. Do you need to alter your objectives or realign expectations around what is possible with the budget you have? Can you select different tasks that may have higher impact? Are your assumptions correct?