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A Guide to Marketing Budgeting (and Forecasting)

* You should own your budget, which means you should understand how to forecast. If you own the budget, know your numbers, you’ll likely get more (budget) and have a realistic understanding of how many customers, users you need to acquire, from which channels, at what cost, over how much time and how much revenue or reach or leads marketing can attribute.

* It’s complicated but not complex, meaning you’ll have to grab some data and do some excel work, or get someone else to do it (but maybe not your agency).

* It shouldn’t be a ‘one and done’ approach, you should revisit your budget (and forecast) ideally quarterly (50% of businesses don’t). In this way there’ll be no surprises when you don’t hit target end of year and don’t get a bonus.

* It will arm you with a much better understanding of how you’ll help the business grow, which channels work best and for what goals (e.g. brand awareness, customer acquisition or sales), which means “Half the money you spend on advertising won’t be wasted; and you will know which half has been”.

* If you want to go batshit crazy or are starting a new role and want to check where the money is really working, *Zero Based Budgeting* is the way to go.

* A free report. We published the results of our marketing budgeting research entitled: A guide to marketing budgeting and forecasting and you can download it free here.

* A free forecasting and budgeting maturity assessment tool. There are four disciplines that make up part of the marketing budgeting assessment.
1. Measurement: Using KPIs which help you understand web site profitability.
2. Tools: Are technologies which help with the measurement and assessment of your performance compared to your peers/competition.
3. Forecasting: Outlining how much revenue or leads, based on the forecasted traffic, you can expect in a given year.
4. Budgeting: Defining how much you spend on marketing in a given year.

It’ll tell you what level you are AND provide some pointers to improve your level, it is a bit of fun not a finite critique of your capability. You can take it here. We’re interested in your feedback on it, which you can post here.

* A guide with some useful information (further below) for one example approach to marketing budgeting and forecasting and some additional links if you need help building a forecast and budget for your CFO.

* Download the report
* Try the marketing budgeting assessment tool
* Read one example approach below
* Comment here if you have insights that might help others build and manage their budget and forecast


One example of how you might approach it…
If you’re a TL;DR type there’s a video here:

Step 1 — Understand the Objectives
Start with defining what your organisation wants to achieve, what’s the defining objective? Hopefully it’s not just to grow at >20% 🙄

This will have a big influence on how you set your budget. Creating a plan for growing revenue, is very different from one which aims to improve profit through reducing costs, or just growing reach for brand awareness.

In this example (just one): We are going to look at growing Revenue by £1m.

Step 2 — Get the data
Now you have your objective, map out the levers which will help your achieve your target. These will vary depending on your route or channel to market.

In this example: We are going to look at the Ecommerce channel only to give us our £1m growth in revenue.

Step 3 — Understand the gap
For the given channel/route(s) to market, we now need to understand what the gap is. To do this you will need to understand how many of your loyal customers will purchase and how many lapsed customers will come back. This will give you an outline of the new customers you need to acquire.

In this example: We will map the existing customers who have purchased from our Ecommerce website. We will also look at the revenue gap we are left with, once we take away existing customers contribution.

Step 4 — Build your funnel
Now you understand the gap and number of customers and sales required, it is time to create your funnel. In this example we will work backwards from the revenue to number of visitors, footfall or phone calls we need to get.

In this example: We will look at our Ecommerce funnel and identify the number of NEW website visitors we need to get to achieve our £1m revenue target. We will use the gap of £250k from step 3.

Step 5 — Define your activities and costs
For your channel/route(s) to market, rework your original funnel from Step 4 using the same targets, but create it as budgeting funnel.

This will allow you to understand the costs required to obtain your “new audience” identified as the gap in Step 3.

In this example: We look at the costs of acquiring the new audience on the website. We also look at the cost of processing this audience in terms of getting the order captured and fulfilled.

To summarise the 5 step plan
Once you have carried out the above 5 step plan for budgeting, you will need to carry this out for each channel where customers can buy your products or services.
This will help you build a full picture of your total customer activity, performance/contribution of that sales channel and what the required budget will be to deliver that sales number.
The output will be a forecast, usually in a spreadsheet which you can then use to determine your required budget and then talk to your marketing team or agency and tell them that’s the target by channel.

From here you can start to plan your media activity, proposition and promotions to deliver against the top line budget.

Other useful links you may find useful when looking at marketing budgets and forecasts.

*You can’t be active on all channels, so define which are best…

*A bit more on Zero based budgeting…

*Old but still relevant…

*If you’re looking for some benchmarks…

*Why your marketing budget should be more budget right now not less budget…

CoFounder Crank | CoAuthor of Building the Agile Business (Digital Transformation) | Non Exec and Advisor to

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