How to choose a correct budget for your marketing campaign

The advertising budget is the first question that needs to be answered while planning an advertising campaign, either for yourself or for your client. The answer to this question will dictate how many different advertising channels you will be able to use and how many different audiences you will be able to target. Follow our tips to learn how to set the optimal marketing budget.

You need to set a marketing goal to find out your marketing budget

First of all, you need to decide what is your marketing goal. It can’t be an abstract goal, like “sales growth” or “increase in revenue”. You have to name a specific number you want to achieve. A specific number is vital for choosing the correct budget fit for you. It also helps to evaluate the success of your ad campaigns. Furthermore, it will be clear for all the parties involved what goal you are all working toward since “mores sales” can mean different amounts to different people. When you have your goal in mind you can calculate what budget will be necessary to reach it. You will only need to know the CPC (cost per click), CTR (click-through rate), and CR (conversion rate) of your campaigns. Maybe you already know these numbers from your past experience or you can Google the benchmarks since they differ from country to country and from ad platform to ad platform. We prepared a budget calculation tool that will guide you through the process. It’s extremely simple and quick to use. You won’t have to blindly guess the amount you need to spend on the new ads anymore.

    How much you are actually able to spend?

    To answer this question you will probably need to check your pockets or to check with your CFO. No matter what are your goals and what type of budget you have calculated with our tool if your finance is limited you won’t be able to spend more. Try to be honest with yourself and try to match your goals with your financial capabilities. Many times I have heard when a client sets an absurdly small budget and names absurdly big goals. Marketing isn’t magic, marketing is science and we can predict what you will earn back after investing a certain amount of money.

    How to allocate marketing budget between different campaigns?

    To begin with, if your budget is quite small don’t plan a myriad of different campaigns. If that’s, the case you don’t have room for experimenting. You have to make your homework in advance. Identify one specific audience which is most likely to buy. Don’t try to cover different channels further dividing already small budget. It is better to focus on one channel where you can find the majority of your target audience. In case of very small budgets if your product or service is searchable we recommend starting from Google Shopping or Google Search ads. These ads target people that are already searching to buy the thing you are offering while other marketing channels are only creating the need.

    If you are not limited by the budget you need to remember marketing funnel theory. Consumers’ journey is usually divided into three stages: Awareness, Interest, and Action. You need to cover all three of them. In the first stage (awareness) we have the biggest audience so the amount of the total budget allocated to it has to be the biggest. The budget amount decreases further down the funnel since the audience size we need to reach gets smaller. While evaluating already running campaigns it gets tempting to increase the budget for the bottom of the funnel while decreasing it to the top of the funnel since BOFU (bottom of the funnel) usually shows better results. That would be a huge mistake since you won’t be attracting new customers to the funnel and only remarketing to the existing ones. Your business will stop growing and even the bottom of the funnel results will tank eventually. It is best to keep a 60%, 25%, and 15% ratio between different marketing funnel stages. These percentages can vary a bit but the main idea is to decrease the budgets further down the funnel. You can see that in our budget calculator tool we are automatically calculating the budget split between different campaigns.

    Remain flexible while setting the advertising budget

    Many entrepreneurs and organizations set a yearly marketing budget at the begging of the new year. It is great since you can plan further ahead and make sure you will have the necessary amount but you still have to remain flexible. It is better to add at least an additional 10 to 15% of the budget to what you have calculated since while planning this far ahead you can’t take into account marketing changes and a potential increase in competition that might drive your expenses up. It is always better to allocate the bigger budget and then underspend it than to go over it.
    It is also important to understand that probably you won’t be able to generate the same results (and spend the same budget) month to month throughout the whole year. Most of the products and services are seasonal and even if they are not, in January and during summer, sales usually go down. If you won’t match your budget to these seasonal changes you will see a decrease in return on ad spend during one month and you won’t be able to reach your full potential during the others.

    If you don’t have any historical data and you are new to the industry, the Google Trends tool is great for discovering these fluctuations in the market. And most importantly it is free.

    Budget allocation is one of the most important things while planning your marketing campaigns. If you spend too much you might waste the money and if you allocate too little you may not give algorithms enough data to start running and optimize campaigns to their best potential. We hope our free budget calculation tool will help you to tackle this task with ease.

    If you want to learn more about digital advertising strategies and the most effective campaigns we created a guide on which ad format is recommended for driving action. Follow Admers on LinkedIn for more tips on how to scale your business.