This method of calculating your marketing budget is anecdotal at best. If you opt for this route, you essentially pick a percentage of revenue to spend on marketing, then choose your marketing projects and tools based on what fits within the budget.
Nevertheless, if you’d like to try this method, here are some recommendations:
Basically, the marketing budget formula for percent of revenue looks like this:
The problem is that this method doesn’t take into account your marketing strategy—goals, tactics, projects, etc.—whatsoever.
Your boss tells you how much money you have to spend. Also… not a very data-driven method based on the goals you’d like to influence and the projects you’re planning to take on to make those goals a reality.
This method is keeping up with the Joneses, and does not foster a blue ocean marketing strategy. With this method, your budget is determined based on the tactics your competition is executing.
For example, your competitor launches a blog. Therefore, you create a plan based on how much it will cost you to launch a blog.
This method goes against much of the work you’ve already completed throughout this marketing strategy guide.
This method requires you to set goals first, then plan your budget to make the goals a reality.
Hmmm…. probably sounds familiar. ;)
This is the best method for setting a realistic amount that will help you reach your goals.
The goals-driven formula looks something like this:
How much money do you spend to get one goal conversion?
Here are a couple ways to calculate your goal acquisition cost (choose one method):
For example, you may opt for understanding how much it costs you to create an average piece of content and divide it by the results it produces.
For example, let’s assume the CoSchedule marketing team spends the following to create an average piece of content:
We use the Google Analytics Custom Report you set up in Chapter 2 of this marketing strategy guide to determine that average piece of content influenced 20 goal conversions.
Following the marketing goal acquisition cost formula, CoSchedule’s example goal acquisition cost is $13.75:
In other words, it costs CoSchedule $13.75 for one goal conversion in this example.
You can obviously average out the cost of several pieces divided by their goal conversions to calculate an even more precise goal acquisition cost.
If the average piece method feels a bit daunting, this is the simpler goal conversion cost calculation method:
Yeah, that looks like the exact same thing as the average piece method, so let’s take a look at another example of how this method actually differs.
Last month, let’s assume CoSchedule spent the following on marketing:
In the same month, CoSchedule gained 1,400 goal conversions.
In this example, CoSchedule’s goal acquisition cost is $11.60.
You can expand your time frame beyond a month, too, to get an even more precise goal acquisition cost calculation.
This is the amount of money you spend to “keep the marketing lights on” each month. Add together all of your costs for:
For example, let’s say CoSchedule has the following monthly marketing operational costs:
In this example, CoSchedule’s monthly marketing operational costs are $28,529.
We can realistically expect to spend $28,529 every month just to keep CoSchedule’s marketing operational.
You set and amortized monthly marketing goals in Chapter 1 of this marketing strategy guide.
The Marketing Budget tab in your marketing strategy template automatically pulls the monthly goals from your Goal Tracking tab you set in Chapter 1.
Simply enter your Marketing Goal Acquisition Cost in cell C6 and your Marketing Operations Costs figure in C7 in the Marketing Budget tab.
From here, the spreadsheet will automatically calculate your goal-driven monthly budgets for the entire year with this formula:
Let’s finish CoSchedule’s marketing budget example you’ve learned throughout this chapter so far.
The amount of money CoSchedule spends to get one goal conversion.
The amount of money CoSchedule spends each month to generate goal conversions.
The number of goal conversions CoSchedule wants every month.
The amount of money CoSchedule needs to spend per month to reach our marketing goals.
^^^ This example calculated the marketing budget for January. Since the example carries out for an entire year, we’d simply run the same formula for each month within our time-bound goal. In this case, it would be 12 times (January, February, March, April, May, June, July, August, September, October, November, and December).
The Marketing Budget tab in your free marketing strategy template spreadsheet automatically calculates this for you for each month and the year.
So now you can follow the same formula to calculate your marketing budget for every month. If you have 12 months to reach your goal, you can simply add together all of those months to know your annual marketing budget.
Congrats! You’ve set your marketing budget! Now that you know your monthly budgets, it’s time to break down your highest priority projects into realistic timelines your team will execute.
Continue to Chapter 9 to learn how to create project timelines.