Marketing Budget for Small Businesses
What is included in a marketing budget?
Developing a marketing budget for a pet business involves evaluating your financial resources, defining clear marketing objectives, and allocating funds strategically to various channels. Consider the unique needs and preferences of your target audience, exploring avenues such as social media, partnerships, and local promotions. The key is to strike a balance that optimizes your budget for maximum impact and brand visibility within the expansive pet industry.
Why is it important to budget for marketing expenses?
While keeping some of your finances ad hoc is important in case you want to opt into any timely promotions (offering a sale on products because an influencer organically promoted them, teaming up with other businesses who propose a surprise giveaway, and other spontaneous promotions), it’s important to have a majority of your expenses planned out for a number of reasons. First, you can give certain marketing efforts more budget based on their ROI (return on investment, something we’ll cover later.) Second, a budget helps with goal setting: there are clear parameters for how much money will go toward a particular tactic to determine its success and define its scope. Third, a marketing budget is essential for the business department to be able to make forecasts. If you or your business manager are thinking about capital or service expansion, you’ll need to know in advance if you’ll have the money to start offering group dog walk classes or another facility location. Fourth, a budget makes sure the marketing departments’ efforts are in line with company goals. And fifth, it allows you to set aside a contingency fund for potential emergencies – think pipe bursts, or sudden increases in rent or insurance.
What percentage of revenue should be spent on marketing?
According to Deloitte’s Annual CMO Survey, marketing will take up approximately 13.6% of a company’s annual budget, and over 8.7% of total revenue is being reinvested into marketing. This amount will help you grow your business in multiple ways. You’ll be able to increase your business’s brand presence, customer acquisition, and retention by spending on advertising, while maximizing ROI and not sacrificing the growth of your business.
How to create a marketing budget?
If you’re running a pet care business solo or with just a few staff members, the thought of creating a marketing budget may seem daunting. However, this step-by-step process ensures that you’ll be able to craft one with ease.
Step 1: Understand Your Customer
To create a marketing budget, you must understand your current customers and who you’re trying to target. It’s a great time to perform your own market research via surveys or interviews, connecting with current customers about their purchasing habits, their satisfaction with your services, and their needs as pet owners. It’s also important to get their demographic information so you can understand their financial status, ages, and family size. This helps you figure out what channels will be most effective. If your audience is overwhelmingly female, maybe you want to plan an event where dog moms and their pets get their nails painted at the same time. If your customers skew older, you may consider using print media to reach out to them, whereas if your customers are much younger, you may consider using methods like Instagram, TikTok, and influencers to find more customers like them. You can also make use of external market research that has already been conducted so you can assess what trends are occurring in your industry. If you’ve found that more people are interested in hiking, you can offer a hiking with their dogs class, et cetera.
Step 2: Define Your Marketing Goals
Decide what you want your marketing spend to achieve. You’ll want ones that are SMART (Specific, Measurable, Achievable, Relevant, and Time Bound), meaning you’ll be trying to accomplish a specific, concrete, possible goal that will help the business within a set amount of time. Possible goal categories can include increasing revenue, acquiring customers, raising brand awareness, opening new locations, or launching new products and services.
Step 3: Choose Your Marketing Channels
Different marketing channels get different types of customers in the door, and you should consider which channels have been effective in the past, as well as ones that you will be able to execute on. If you have a staff member who is great at shooting TikToks, you might want to dive into organic and paid social media. You might want to boost your online presence by improving your website and then taking out Google search ads to send traffic there, or you might want to go the experiential marketing route, with events at your business and branded swag. You will probably need to use more than one channel to achieve your goals.
Step 4: Calculate Average Cost Per Lead & CVR
Take a look at your current marketing: how much did you spend on it, and how many leads did it bring you in the past year? Divide the spend by the customers to get the average cost per lead. For your website, you can divide the number of people who visited your website or saw your ad by those who made a purchase or booked a service with you. Then, you’ll have to forecast how much both of these numbers will need to improve in order to reach your goal. At the end of the year, you can report on how effective your marketing efforts were in increasing those factors.
Step 5: Allocate Budget
Once you know what channels you’re using, it’s time to decide how much spend will go into each of them based on priority and their predicted ability to help you reach your goals. If you’ve never created one TikTok video, you wouldn’t put all of your money into TikTok ads, whereas if running promotions was effective for you in the past, you might put more money into the promotions category of your budget.
Step 6: Measure ROI
You’ll have to assess the ROI, or return on investment, of your marketing efforts. It’s a percentage that helps you understand if your marketing was effective. You’ll use a simple formula, which we’ll mention below, to divide net profits by marketing costs and multiplying that number by 100.
Marketing ROI
What is ROI in marketing?
Your ROI (return on investment) is a performance metric that lets you know how successful your marketing was. To figure out your ROI, you have to track all costs associated with marketing, including staff overhead. You’ll also track the revenue and other relevant metrics (leads generated, conversions, customer acquisitions). This way, you can make data-driven decisions about where to allocate money in the future.
How to Measure Marketing ROI
Measuring marketing ROI is achievable using a simple formula. You’ll divide net profits (the revenue generated minus any marketing costs) by marketing costs. Then you’ll multiply the results by 100. So if a campaign made $200 but cost $50 to produce, you’d subtract 50 from 200 and divide that by 50, then multiply that by 100, giving you a 300% return on investment.
Common Marketing Budget Mistakes
There are several types of mistakes you can avoid when setting your marketing budget. The first is setting your budget unrealistically high or low, giving you either overspending with not enough return on investment, or not enough budget to move the needle. The next is not measuring campaign success. It’s easy to go off of how social media comments are responding to an ad, for example, or how your team feels about an event they threw, but these more qualitative results don’t tell the whole story. You also don’t want to ignore market research: if your customers have a lower budget in mind and you create a super premium dog grooming service, don’t be surprised if they can’t afford it and the money and effort you put towards creating and promoting this service gets lost. Overlooking fixed costs, (campaign costs) variable costs, (overhead and salaries) and potential hidden costs (fees if you hire an agency, expenses for shooting ad creatives like props and equipment rentals) is another mistake – always account for the 360-degree costs of a marketing campaign. And the last major issue is being too rigid with your campaign, creating a failure to account for seasonality and marketing testing. If you’re running a huge sale and choose to offer it in June rather than the holiday season, you may miss out on Black Friday shoppers. And if you’re not leaving a portion of your budget open to testing — advertising on a new social media platform, or throwing an event you’ve never produced before, you could lose out on diversifying your customer base. As long as you set appropriate goals, set aside an amount of funding that is affordable for your business, and communicate your expectations with the rest of your staff, you’ll be on the right track to a paw-fect marketing budget.
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