Lido’s Guide to Creating a Marketing Budget in 2023

Learn how to create a marketing budget as well as the significance of having one. Additionally, learn how big one should be, what it should be composed of, and what should be considered in making one among other things.

10 minute read.
Table of Contents

1. Why have a marketing budget?

2. How big should your marketing budget be?

3. What should be considered in making a marketing budget?

4. How can you assess the effectiveness of your marketing budget?

5. What are the steps in creating a marketing budget?

6. Conclusion

If you’re running a startup business, chances are that you give most of your attention to polishing your products and services, as well as to how to promote them so they will make a huge splash once you launch them. If you’re running an established business, you must be focused on increasing your revenues and minimizing your costs. 

To do these things, you need to devote a portion of your funds to a marketing budget. A carefully-crafted marketing budget will help you pursue your business goals. This guide will help you do so, plus show you some tools you can use right now!

Why have a marketing budget?

Someone running any business knows how important money is. You have to spend the money, but it has to be spent on the right stuff so your business will grow. If you spend the money on the wrong stuff, it will cause losses on your side. Therefore, you need to do the following:

  1. Plan your expenses, up to a single cent
  2. Don’t underspend
  3. Get the biggest bang for your buck

This is only possible if you have a marketing budget. Why have a marketing budget, then? WebFX lists the following reasons:

  1. It helps you stay on track financially. A well-planned budget means that your expenses are also controlled. You can also allot a portion of your budget to unexpected expenses that may arise during the period covered, thus minimizing the impact on the finances of your business. 
  2. It helps you allocate funds to the right places. When you create your marketing plan, you set a series of goals and set up strategies to achieve them. You then mold your marketing budget to make it possible to implement these strategies. 
  3. It helps you set benchmarks and goals. Since your marketing budget is tied to the marketing plan, you can set expected outcomes for each strategy you plan to implement. Additionally, you can easily see which investments are giving you the largest return of investment (ROI). You can then spend more on those investments in the next budget period.
  4. It helps you plan long-term. Businesses need to plan both for the short-term and long-term. Having a marketing budget helps you plan for the long-term by setting an assured source of funds throughout the budget period. 
  5. It’s an investment in your business’s growth. As you will learn later on, you don’t just invest in the immediate costs such as ad space but also on initial investments whose growth in value reflects after some time such as training costs and wages for your employees.  

A marketing budget is not designed for you to lose money but for you to increase your revenues, so you shouldn't hesitate to plan your marketing budget even if you're a startup business still working on polishing your products and services. 

How big should your marketing budget be?

The answer to this question depends on whether you're running a startup or a business with an established marketing plan. The general rule is, you have to spend a bigger slice of your initial budget on marketing if you're running a startup. Why?

  1. You need to exert more effort to attract your first customers 
  2. You need to make sure you make the best first impression that you can of your business and the products and services you offer
  3. This is also the time you make your initial investments in your marketing capabilities

These are the reasons you have to spend a bigger portion of your budget initially. Once you have established your business, you would notice that you can spend a smaller portion of your budget on marketing, but that depends on the marketing plan you have adopted, so always make sure you have a good marketing plan! We will talk about it later. 

Are there any general patterns in the amount of budget allocated for marketing? Yes, there are.  Here are some stats:

While you can use them as your benchmark, we still recommend that you pursue a goal-driven marketing budget, where you align your expenses with what you need to achieve the goals you set for growing your business. 

What should be considered in making a marketing budget?

As we have said in the first section, your marketing budget is tied with your marketing plan. The following factors should be considered when you start drafting your marketing budget:

Regular market research is like the crew of a ship regularly checking if the ship is sailing in the correct direction. Regular market research will help you quickly react to changes in the trends in the market, thus minimizing potential losses if they ever happen. 

(List summarized from Tutor2U, MBASkool, and Marketing Teacher)

Consider these factors, and you will be able to identify your goals, the strategies to achieve them, and, therefore, your marketing budget.

How can you assess the effectiveness of your marketing budget?

The effectiveness of your marketing budget is illustrated by the return of investment (ROI). WebStrategies defines ROI as

ROI = (Attributable Sales Growth - Marketing Cost) / Marketing Cost

In general, the ideal ROI is 5:1; that is, you earn $5.00 per $1.00 spent. This is not a straightforward calculation. You need to answer the following questions:

What metric or metrics should you measure in order to quantify the sales growth attributable to the marketing budget?

Once you answer that question, you now need to set up ways to measure these metrics that quantify the effectiveness of your marketing budget. Here's some advice from some of the marketing experts, as compiled by Databox:

Clearly, the solution is to compile data across all your marketing channels into a single analytics tool that will analyze it and calculate the important metrics that will help you see whether your marketing plans and strategies are successful or not. 

The ideal analytics tool should give you a big picture and also allow you to zoom in to individual data - helping you fine-tune your strategies and pursue profitable ones when needed. 

One such analytics tool is Lido, which will help you integrate the data from multiple marketing and e-commerce channels into a single dashboard and calculate the chosen metrics, helping you see whether your marketing plans work or not. Click here to learn more about Lido. 

What are the steps in creating a marketing budget?

After going through the considerations such as your budget and your market, you can now finally create a marketing budget that will help you fulfill your business goals.

Step 1: Identify your marketing foundation, or establish it before launch

Your marketing foundation is what you have. This includes the following, as identified by PR 20/20:

If you are part of a startup, however, you would instead get similar information through market research, so make sure you conduct it before crafting your marketing plans and strategies. 

Identifying them will give you the big picture of your business, which will help you craft your marketing budget. Your marketing budget should be directed to the marketing strategies that maximize your advantages, giving you the biggest ROI.

What if you're creating a marketing budget for a startup? Then what you have above is your list of targets for investment. You need to polish them first, as they will set the tone of your future marketing plans. For example, the success of your business can depend on the brand positioning, so you cannot afford to underspend on these important things that your business should have first.

Step 2: Investigate your marketing funnel

The summary of the marketing funnel.
The summary of the marketing funnel. Image source


Investigating your marketing funnel yields a huge amount of insights, including “weak links” that you can target in your next marketing plan and budget.

Let us review first what the marketing funnel is. ClickFunnels defines the marketing funnel as the path the customer takes from being aware of your brand to becoming a paying customer. 

There are three main steps in the marketing funnel, with the corresponding insights you can gain from investigating them:

  1. Lead generation: generating awareness of your brand. This is how your customers find you in the first place. 
  2. Lead nurturing: converting that interest to intent. Customers often ask for additional information before they decide to buy your product or avail of your service. 
  3. Sales: fulfilling the intent to buy by actually availing the product and/or service. At this point, the customers make the critical decision to buy your product or avail of your service. There are several things going on in their mind when making that decision. 

To investigate your marketing funnel, you need to make sure you get data from all these important steps. FullStaqMarketer lists down the following metrics you can measure to assess the performance of your existing marketing funnel:

Step 3: Select your marketing goals

Your marketing goals depend on the current situation, which we have identified in Step 1 and Step 2. 

If you are a start-up, you should prioritize building your marketing foundations, as listed in Step 1.

If you are in an established business, you have more potential goals to pursue. OutboundEngine lists the following questions you can ask yourself:

  1. How much revenue do you need?
  2. How many sales do you need to make your revenue goal?
  3. Determine how many leads you need to convert the right number of sales. At what percentage do your leads typically convert? 

Some of the goals include earning more sales, increasing leads, earning more subscribers, or increasing brand awareness. 

Step 4: Choose the marketing strategies and channels to use

There are now several marketing strategies and channels you can use. The following are the most commonly-used strategies, as defined by WebFX:

You should consider not just the viability of the strategy but also its associated costs. For each strategy, there are several services to choose from, in which you need to also compare. Most of the time, businesses avail of more than one service for the same strategy. For example, a company can pursue social media advertising via Facebook, Instagram, and Tiktok. 

Step 5: List down the prices and costs

At this point, you should have decided on the marketing strategies to pursue. You are now ready to go to the spreadsheet to list them down.

There may be several things you have to spend on. This is a list of potential items you should include in your budget:

  1. Software and tools
  2. Website maintenance
  3. Salaries
  4. Outsourcing
  5. Advertising spend
  6. PR Costs
  7. Events/Trade-show costs
  8. Training
  9. Gear for content creation

(List condensed from Databox, Hubspot, and CoSchedule)

WebFX lists down the following prices:

The actual prices will depend on the actual services and items you availed for your marketing campaigns.

At this point, you are now ready to implement your marketing budget!

Conclusion

It should be crystal clear to you now that you need to create a marketing budget that aligns well with your marketing goals. Plan well, and achieve your goals this year!

References

How to Plan a Marketing Budget in 6 Steps: 2021 Guide

The Importance of a Marketing Budget | Empire Creative

How to Put Together a Marketing Budget Plan You Can Track

How Much Should You Be Spending on Marketing?

Marketing Budget | Business | tutor2u

Marketing Budget Definition & Importance | Marketing Dictionary

Summary of the Marketing Budget

What Is A Good Marketing ROI?

10 Components of a Modern Marketing Foundation

What is a Sales Funnel? Beginner's Guide With 6 Examples

How to Create & Measure Your Content Marketing Funnel | Fullstaq Marketer

How to Set a Marketing Budget for Your Small Business

Summary of the Marketing Budget

How to Manage Your Entire Marketing Budget [Free Budget Planner Templates]

16 Ways for Creating A Marketing Budget (and How to Spend It)

Budgeting 101: How to Set and Allocate Your Marketing Budget

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