How to Plan a Marketing Budget

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A marketing budget is an estimate of projected marketing expenses for market research, staff compensation and communications. The goal of a budget is to allot expenses by month and year so that the necessary funds are there when needed. It is usually prepared by the sales and marketing department in coordination with the company's central accounting team. A marketing budget is based on the marketing plan for achieving sales and profit growth.

Prepare the budget template using a software spreadsheet because it will make the calculations simpler. The column headers will be the months, with a separate subtotal column for the year. Group the row headers into sections for marketing expenses, with rows for salaries and office expenses; market research; marketing communications, with rows for catalogs, branding, advertising, promotions, media and investor relations, website design and support, direct and online marketing; and customer acquisition support, with rows for distribution channel support and sales lead generation.

Tailor the budget to your business. For example, if you run a small bakery, you will probably need only five or six line items for promotions, newspaper advertising, channel support (expenses to market and distribute your baked goods to local restaurants and hotels), a web presence and the salary for one or more part-time marketing professionals. However, if you are running a larger business with several products, then you might need a separate marketing budget for each product.

Select a budget methodology, such as percent of historical sales. Historical data can provide information on the effectiveness of different marketing strategies. For example, if you participated in several trade shows last year, then reallocate your trade show budget to those events that produced the most sales-generating leads.

If you do not have historical data, use industry trade association data or comparative data from adjacent industries. For example, if you own a restaurant, then new home and office construction projections in your area should help you budget for potential incremental sales and marketing expenses.

Enter the monthly numbers based on your methodology. If you are using the percent of historical sales method, enter the formulas for one column (representing a month) and then duplicate them for all other months. Adjust the formulas based on changing business and economic conditions, but be realistic. For example, increasing advertising expenses from 6 to 12 percent may not automatically lead to a doubling of sales because the two are not directly correlated.

Link the marketing budget to the sales and profit impact to secure management support. Using historical financial data, showing management how selective increases in marketing expenses can lead to increased sales. For example, if increasing online marketing expenses by 5 percent last year led to a 10 percent increase in online orders this year, then management might agree to an increase in online marketing spending again this year.

Tips & Warnings

  • See Resources for a budget template.

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