As a senior marketing executive, you likely spend your day juggling an ever-changing list of priorities. When it is time to create your annual budget, you may view the task as an annoyance rather than an opportunity. However, the act of creating your budget gives you the chance to review what you have done, consider what you want to accomplish during the coming months and create a map that can help you achieve your goals. Unless you avoid the most common marketing budget pitfalls, though, you could find that your budgeted funds fail to generate the results that you want. Here is a list of the 10 most common errors that occur when planning a marketing budget.
Not Having A Solid Marketing PlanSuccessful marketing requires money, but it also requires a great deal of preparation. Without a solid marketing plan, you are not prepared to make decisions that ensure that you are spending your budgeted funds appropriately, wisely and effectively. A strong plan will include at least the following:
- In-depth knowledge of your target market
- Your competitive position within your target market
- Your strategies and tactics
- Your plan to differentiate yourself from competitors
- Your KPIs to measure success
Not Engaging Business PartnersMarketing teams sometimes forget that they exist for a purpose: to help the company achieve its business goals. Achieving the marketing goals can be meaningless if they are not aligned with the company's goals. Every marketing budget should be designed to support the company's business goals. Otherwise, marketers can find themselves scrambling to shift priorities and objectives without having sufficient funds remaining in the budget. This means that marketing executives must communicate with other executives and leaders to gain a thorough understanding of the overall objectives and strategy. Engaging with business partners also gives marketers the opportunity to enlist support for marketing efforts. For example, marketing automation relies heavily on database quality, but marketers typically have little control over collecting, maintaining and scrubbing the data.
Relying Too Much On Historical BudgetsLast year's budget can be an excellent starting point for creating the marketing budget for next year, but it is only a starting point. Even if all goals were met and the allocation of funds proved accurate, there is no guarantee that the same formula will work next year. Technology is evolving rapidly, your competitors are making changes and your customers are expecting more from you. You have to base your new budget on what you want to accomplish rather than what you accomplished in previous years.
Getting Too Detailed
Marketers sometimes "paint themselves into a corner" by being too specific when preparing a budget. To illustrate, suppose you learn in December that a new software called DuzItAll is scheduled to be released in six months. The product sounds as if it would be perfect for automating all of your marketing efforts, but it carries a substantial price tag. You create a line item in your budget devoted to the purchase of DuzItAll. However, the software is never released because the company folds. You now have to reallocate the funds, which may require obtaining approval from the CEO or CFO. Avoid complications by ensuring that your budget categories are vague enough to give you a little room to maneuver.
Devoting Too Little To Marketing For Existing Customers
Acquiring new customers is great, but you will spend up to 700 percent more to gain a new customer than it would cost to retain an existing customer, according to Bain & Company. Furthermore, the likelihood of closing a sale with a new acquisition is in the 5 percent to 20 percent range, while the likelihood of selling to an existing customer is between 60 percent and 70 percent. Despite these statistics, however, many B2B marketers devote a disproportional part of their budget to customer acquisition rather than customer retention. A better method is to ensure that your budget contains provisions for engaging and nurturing existing customers.
The timeline is especially critical if your budget is based on a percentage of sales. Since a campaign will need to be initiated before you can expect sales, the marketing costs will be incurred before the revenue is realized. The marketing budget for a given period should not be based on the sales projections for the same period. Instead, the budget should include these additional up-front costs to avoid overspending later in the year.
Ignoring Actual Needs
Marketers are often presented with a problem for which there is no easy solution. For example, a CEO might say that marketing efforts must generate 1,000 leads per quarter next year but only approve a budget that could not possibly produce more than 300 leads. Obviously, either the marketing goals or the marketing budget must be revised. Too often, however, marketers accept the goals and the budget, ignoring the realities of the situation. Be prepared to dissent; document your case and resolve the conflict before you finalize your budget.
Incorrect Or Excessive Metrics
Finding the right metrics to measure your progress can be challenging. If you try to measure everything, your team can lose focus and be so distracted that the most critical KPIs are overlooked. However, if you are measuring the wrong things, you will not be able to track your progress against your goals. Take the time to prioritize your objectives and develop a clear set of metrics for each strategic objective.
Starting Too Late
You should allow yourself ample time to create your budget. Otherwise, you could find yourself rushing to complete it, which means that you could overlook vital areas. One area that often causes delays involves communicating with other stakeholders. It may take time to align the goals of the marketing, sales, accounting and production departments. For example, if you establish a marketing budget to generate 5,000 leads a month, you have to know whether sales can handle that many. If not, you will just be wasting your money. Because compromises may need to be made, you should allow yourself extra time to fine-tune your budget.
Treating Budgets As An Annual Task
Your budget work does not end as soon as you have created the budget and received approval. You should have a plan to review the numbers frequently throughout the year. Compare spend with return, evaluate the impact of certain activities and assess whether you need to change the focus of your efforts. You may find that you need to reallocate funds to a tactic that would give you more reach in your target market, for example, or you may discover that you need to make some mid-campaign adjustments.
In the final analysis, your budget should be a tool to help you achieve your goals rather than an unyielding taskmaster. Getting it right is critical, so it is well worth your time to do so. Avoid these common pitfalls can help you ensure that you will have a budget that lets you be more effective.