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As with any other costs, marketing budgets can spiral uncontrollably – if you let them. But spend too little and you may not gain the upward momentum you need. So defining your marketing budget is essential when planning an effective marketing strategy.
How much you should spend on your marketing budget depends very much on what you want to achieve, so before you can begin to set your budget you need to have a very clear idea of what your goals are. If you haven’t worked this out yet, you might want to read our earlier blog about how to create measurable marketing objectives.
There are some rules of thumb that marketers use that can be helpful for working out how much you need to invest in marketing to get the results you are looking for.
THE AGE OF YOUR BUSINESS
The general adage here, is that you need to invest more pro rata in marketing when you are launching a business because you need to build awareness. The yardstick is that businesses that are in their first five years needs to spend 12-20% of gross revenue (or turnover), but from year 6 on this can be reigned back to 6-12%.
YOUR BUSINESS AMBITIONS
If you want to grow your business, it should come as no surprise that you need to invest more in marketing than if you just want to tick over at your current levels. The guideline here is that if you want to maintain your market share, 5% of your gross revenue should be allocated to marketing; if you want your business to grow in turnover or market share, you need to double this to 10%.
Defining your marketing goals and the budget you need to invest to achieve them are vital before you undertake any marketing activities; getting these right will help you devise an effective marketing strategy to support your business development.