Marketing Focus – Marketing Budget
Knowing how much money to allocate to your marketing budget is tricky. It’s important for profitability and long term success, but obviously you don’t want to spend more than you need to in order to receive a return. There are three main approaches for setting budgets each of which have advantages and disadvantages:
1. Matching competitors’ spend to gain market share
In a competitive marketplace, we should be aware of the marketing activities of our main competitors and how this is affecting our sales and profitability. By monitoring our competitors’ activity we can estimate how much they are spending and how they are promoting themselves and go head to head to gain market share.
However, it is difficult to accurately estimate the figures and if you are competing against the market leader you will not be able to match their spend. Every company should track their competition, however the challenge for a smaller company is to find more innovative and low cost methods to reach their target market, rather than simply copying the larger companies and risk not comparing well against the more established brand.
2. Percentage of sales
Allocating a set percentage of the profit to promotion and then dividing this budget between the different marketing functions. This appeals to the budget setters as a straight forward method to put a figure against the marketing function, without damaging the profitability of the company. Many companies set their budgets in this manner.
However, effective marketing has the power to increase the profitability of a company and when business is declining, that is the time to invest heavily in marketing. With the percentage of sales method, your marketing budget diminishes as your sales decrease and will exaggerate this downwards trend.
3. Objective and task method
This involves determining the marketing communications objectives, the tasks necessary to achieve these objectives and calculating the cost of each element to enable us to fulfil our objectives most efficiently and effectively.
This is the best method from a marketing agency’s point of view, as it allocates the appropriate budget to the task required. An agency could get carried away setting a budget in this manner and need to be cut back by the client, but at least it is a good way to show that the objectives are too ambitious to match the budget available if that is the case.
Shaw Marketing Services can help you put together a cost-effective Costa del Sol Marketing budget to meet your sales objectives. Contact us for more information.