If you’ve recently been handed the reins of a marketing department or have managed a small business marketing effort for a couple of years, you know one of the great questions that flummoxes all of us in marketing from time to time: how do I allocate the money I have?
Setting a marketing budget and figuring out where to divide the slices of the pie is a challenging task. “How to set a marketing budget” has 24.2 million results on Google, so it’s clearly something people are thinking about — and posting about themselves.
We’ll approach this in a number of different ways around key questions that people often ask. We’ll also address the ROI of various concepts and how different aspects of marketing can interact.
The most logical place to begin any discussion of marketing budget, though, almost has to be headcount and team composition. You need people to organize the marketing strategy, execute it, and make sure campaigns are performing well. You have to pay those people, and those salaries will be your biggest cost going out. Let’s begin by trying to optimize that aspect of your budget.
Headcount and Team Composition
Per ZoomInfo, here’s a breakdown on average size of marketing teams:
In this case, large companies are $250M+ in revenue, medium is $25M to $250M, and small is under $25M. Your specific organization may not reflect this graph — we’ve seen $15M companies with 12-person marketing teams, and Slack famously became a $1B valuation company with almost no marketing team — but this is meant to represent an average.
Mike Volpe, the former CMO of Hubspot, wrote a blog post about marketing team composition in late 2014. He included this slide from a presentation he once made:
In this case, “attract” are roles that draw people in. Think writers, designers, SEO specialists, and social media-facing employees.
“Convert” refers to conversion optimization. These would be people working on landing pages, inbound marketing methodology, lead generation programs, calls-to-action, and the like.
“Close” refers to sales-marketing enablement. If they’re not specifically sales employees, they help sales with resources to close leads and prospects into actual deals.
As you can see in Volpe’s slide, almost regardless of team size, you want about half your marketing team to “attract” employees — which would also be called top-of-the-funnel.
Hubspot is a very well-respected marketing platform, so while this breakdown may not work for your specific organization to a tee, it still has value in terms of how to think about your marketing team.
We can’t really help you on compensation for these roles (that varies widely by company), although it’s always best in marketing and sales jobs to offer some kind of ‘on-top’ package. In this situation, your marketing team members would have a base salary of, say, $50,000 (again, not exact numbers). If they work at the ‘attract’ stage in blogging and it can be shown that some of their blogs drove a new prospect who became a paying customer, they receive a portion of that deal as ‘on-top.’ It’s akin to a bonus/commission. This helps directly tie day-to-day work to the bigger revenue picture of the company.
Investments By Channel
We’ll break these down one-by-one. Again — all this can and does vary by industry and the skill sets of those involved, so the numbers may not be perfect for your business.
Blogging: By some measure, 93% of companies using an inbound methodology increase leads. If you’ve never heard of ‘inbound,’ it refers to a marketing strategy where you draw people in with content and education-type posts, as opposed to pushing out your message (advertisements, direct mailers). A cornerstone of inbound methodology is blogging. Now, as more companies have embraced the idea of blogging, that obviously means there are more blogs in the world — and more blog posts. At the same time, people’s attention spans are probably getting shorter, not longer. This creates a supply-demand problem with blogging, but you can still get ROI here. The key is to push out interesting content in a unique voice — and make sure you tie it to actual Google keyword research (i.e. what people are searching for) and not words you use internally. Many companies make that mistake, and it reduces the return on their blogging efforts.
E-Mail Marketing: Many marketers and marketing consultants adore email marketing as an ROI measure. It’s usually cost-effective, and it’s one of the only ways to beat an algorithm right now — an e-mail will land squarely in a person’s Inbox regardless of what other e-mails they’ve opened in the past. Invest money here, but investing a smaller amount can still yield solid returns — so you don’t have to dedicate a large chunk of budget.
Social Media: There is some research indicating skilled social media users are six times more likely to exceed their quotas, seen visually here:
… in short here, social media is a great tool — but many companies forget the first word of the concept and instead of being social, they just push out their offers and PR documents. That doesn’t get you new customers, which is where social can really shine. Dedicate resources here, but make sure you spend some time when hiring to get the right person. By “right person” in this context, we mean someone who understands your business and understands how social can be a part of that business.
Ads: There are many different types of ads these days, and the belief is still that traditional/television ads will have the highest ROI. Different studies have seen different results there, but most small businesses can’t afford television ads anyway. Social media ads have resonance — Facebook ads can be especially cost-effective for SMBs and deliver strong ROI — and Google Ads (the program is called AdWords) can be effective in some industries. Certain industries have very high cost-per-click (CPC) rates. If you’re paying $25 every time someone clicks on an ad of yours and only 10 percent are potential customers, that means you cycle through $250 before getting one lead in the pipeline. That doesn’t seem like a lot of money, but it adds up. Facebook and Google are the two major digital ad platforms right now, and $250 on Facebook will go a lot further for an SMB (in most industries). You can spend money here, although it might be best to speak with an expert before you do so — and evaluate your specific corporate value-add. B2B, for example, doesn’t perform as well on Facebook but does quite well on Google.
Podcasts: All the rage in the last 3-5 years, spurned on by Serial and others. These are great for getting your message out there and/or helping with brand voice and ideology, but their bottom-line ROI isn’t going to be huge. To do a podcast right is also a lot of work (scheduling, production, posting, show notes, graphics, etc.) A shoddy podcast won’t get any interest, and a great one will — but a great one will have a few people working on it as a chunk of their week. That’s sometimes a hard time commitment for SMBs.
Videos: Companies shy away from videos often because they lack the technical expertise to produce them in a quality way. That is understandable. In reality, every business — SMB to enterprise — should have a short, easy-to-embed video explaining their business model. Even if that’s all you do with video, that’s a good start. Humans process video/images 60,000x faster than words/text — so it’s a good way to explain what exactly your business does and how it can benefit the customer. If you spend a bunch of money to get it professionally done but it lives on your homepage and social channels for years and draws people into your business value, it’s worth it.
Events and Trade Shows: It’s hard to replace face-to-face interaction as a key to selling products or getting new clients, so events and trade shows have a strong ROI, typically. They also cost a lot: you need to get people there, get your equipment there, house people in hotels, etc. Look carefully at sales numbers that have come out of an event beforehand. If you don’t have that data, try modeling it. If you spend $10,000 to get your team out to an event for three days and make a $1 million deal, that’s excellent ROI — but that doesn’t happen at every trade show or event.
Overall: If you take nothing else from this, here are a few bullet point keys to setting your marketing budget.
- Figure out the composition of your team and their salaries based on financials overall.
- Determine who your target customers/end users are. Write that down.
- Look at the various marketing options available to you.
- Try to figure out where your specific customers are most likely to be found.
- Navigate the biggest chunk of marketing budget in that direction.
- Consistently monitor and evaluate how different spends and campaigns are going.
- Adjust as needed.
Setting a marketing budget is no easy feat, especially because the definition of ‘marketing’ and various applications of the funnel have changed dozens of times in just the past 10-15 years. If you follow some of the advice above with an eye towards the final bullet points, you should have a landing place for your initial conversations, though. And seeing as it’s already almost July 4th, those FY17 discussions may be commencing soon.