Building Your Marketing Budget

What's the right way to build a marketing budget? How do you come up with something that will accomplish your goals, make sense to your non-marketer colleagues, and that you can sell to your organizations management?

Ask ten marketing pros this question and you'll get ten answers. And in reality, there isn't one answer that's right. But building a budget from scratch - or evaluating a budget you've inherited - can frustrate some of the smartest people around. So I'm going to share my answer to the question, with some explanation of why I like my approach.

A good budget process does more than give you numbers to put into buckets for the accounting folks to track. It should help you plan you activities, think about why you are doing them, explain to others why they're valuable, and help you make decisions when you don't have enough money to do it all. (That's almost all the time for most marketers!)

My process is built on a few key ideas:

• Take care of basics first - or else nothing will work well.


• Understand what parts of the budget you can sensibly do ROI on, and what parts are "fixed costs" of doing business.


• Have a framework that lets you decide where to pull back when times are tight - and how to communicate to your peers what the results for the business will be.

The Basic Categories

In this article I'm going to talk about the basic categories that you can assign your marketing expenses to. When I say basic categories, I do mean basic. We're not talking about brochures vs web content vs online advertising vs printing here - but important marketing functional areas that need to be covered.

• Basic market building is the foundation for everything you do. This is the unglamorous stuff that makes or breaks you: marketing research, basic public relations, and analyst relations if it makes sense for your industry.


• Support materials are the things that you need to do business. This is where you budget for your web site, collateral (printed or electronic, depending on your customer expectations), and so on - the things that your sales force will need to have to talk to a customer, or that you will need when you sit down to meet with a partner. Depending on your business, there may be other items that fit here logically. For example, if attending a certain conference is an absolute requirement for your industry ("If you're not at WidgiCon, no one will talk to you") that would be a basic support item.


• Programs are the things that makes your sales boss love you and that most of your executives will immediately understand. These are the activities that produce measurable results - your direct marketing campaign, your lead generation telemarketing, and so on. These are usually the easiest things to get buy-in on, because people understand the impact on business.

The order of those items is meaningful. All three are important, but without basic market building and support materials, you will have a very hard time getting far - and all of the programs you do will be far less effective (on a return per dollar basis) than they are for companies that are working from a strong marketing foundation.

There are a few types of expenses I haven't mentioned, because they can be in different categories depending on the dynamics of your market. Advertising is the best example - if you are doing basic brand awareness advertising, you can make a strong argument that it's a support activity or a market building activity. If you're doing direct response advertising, it's clearly a program.

It's also important to remember that the priority of these activities is not necessarily reflected in the expenditures. There are certain costs to doing programs that you cannot avoid. You can also spend a lot of marketing research and analyst briefings - but if you're in guerilla marketing mode, you can also dig out a lot of information yourself, make your own analyst calls, and use your "sunk costs" (that would be your salary) to cover these items.

Up next - building the budgets for each of these areas.