How to Create a Marketing Budget for 2023

Updated 2023.

Due to the various challenges the world has faced throughout 2020 through 2022, almost all businesses are feeling the pressure to boost their digital marketing efforts in the coming year, as brand awareness and messaging are more important now than it has ever been before. Businesses have to plan ahead and make sure that they're ahead of the game in 2023 - or at the very least, ahead of their competitors in order to maximize whatever opportunities lie ahead.

Staying front of mind

Businesses need to stay front of mind and ahead of their competitors if they want to make it through these tough economic times, and digital marketing is the way for them to keep themselves ahead of the competition.

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The problem is that many businesses, particularly small businesses and startups, do not allocate enough money to their marketing endeavors and end up spending their marketing budget haphazardly and without strategy. This has been the case for small businesses even before the COVID-19 pandemic hit the globe and now this is quickly becoming the case for all businesses no matter their size, because we are heading into the new normal and teams are scrambling to push marketing work through as quickly as possible.

But a solid marketing budget is essential when it comes to creating brand awareness, putting your business ahead of your competitors and selling products and services effectively.

Below, we outline 6 steps that businesses should follow to develop a marketing budget for 2023.

1. Understand your Customers

Before you begin building your marketing budget, you need to know which online channels you can use to reach your target market. This requires a lot of research into your target audience and you need to learn as much as you can about who they are, how they engage online and where they find information.

What you should be asking about your target audience:

What is their age group?
Where do they live? Big cities or rural areas? Be specific about location.
What brands do they engage with online?
Where are they present and active online?
What type of content would help them when researching products or services that we provide?
What type of content would help during the decision making or purchasing process?

All this valuable information needs to be unpacked and researched by your team and once you have a fully rounded understanding of your potential customer, you will have the right information to figure out the best way to guide them through the sales funnel and buyers journey.

2. Understand your metrics

In order to create an effective marketing budget, you need in-depth knowledge of your buyer but you also need to understand your sales funnel and the numbers that drive it. This means that you need to be able to track your results as you generate new sales opportunities and convert leads into clients. There are certain metrics you should be able to have access to and it is these metrics that will provide you with insight into your marketing campaigns, and let you know whether or not they are working toward or meeting your goals.

What you should be able to track:

Website visits per month and from which sources
Leads generated per month from visitors
Leads converted to Sales Qualified Leads per month
Leads converted into sale opportunities per month
Opportunities that have converted into clients per month
Value of every new client/deal

This is the kind of information that will give you insight into how well your marketing campaigns are working, and through this data you will be able to see what is not working and amend accordingly. You can harvest this information through a variety of digital sources, including Customer Relationship Management software, Google analytics, Social Media analytics and more.

A strong Customer Relationship Management software or CRM, is the best bet when it comes to tracking your campaigns, monitoring your leads, nurturing your leads and converting leads into customers.

3. Budget Based on Revenue

Many businesses will allocate a percentage of their projected gross revenues to their marketing budget, however, the ideal allocation depends on a variety of factors including your business capacity, industry, growth capacity and how quickly you want to make a marketing impact.

Let’s take a look at an example, during the first few years of brand building, a business may spend upwards of 20% on marketing in order to set themselves apart from their established competitors.

When it comes to smaller businesses, a great way to look at your marketing budget is to spend 7% - 8% of your revenues on your marketing endeavours, with the budget can be split between the following:

Website Designs and Development
Blog Article Creation
Sales Collateral
Paid Campaigns
Social Media Marketing
Content Creation across all channels
Events

The general 7-8% rule has been put in place for businesses that have a revenue margin of 10 - 12% (after expenses) - which includes marketing budget.

However, if your company’s margins are less than 10 - 12%, you need to consider allocating more spending to your marketing efforts. It is important that businesses do not base their marketing budget on “what is left over for spend” because your marketing is of value and is a business asset. You need to be seen to make sales - and that is why your marketing should never be a final thought.

4. Allocate and Spend your Marketing Budget Wisely

Your marketing budget needs to be a part of your overall business strategy, and you need to outline the costs in order to know how you are going to achieve your marketing objectives and goals within a specific period of time. And if you want to do that, you need to properly research what your chosen marketing tools will cost.

For example, you may find that your audience is mostly active on Facebook, and you would want to take advantage of that through targeted and paid social media campaigns, or you will want to get potential customers to your website as quickly as possible, and you may want to do this through Google AdWords. In most cases, you are able to tailor these platforms to suit your budget for each campaign, for example when it comes to Google AdWords you will be able to research the keywords that your customers are searching for when they are looking for your product or service online, and you can bid on those keywords. Keywords and keyphrases may cost more or less, depending on their search volume, so it is important you do the research on this and budget for your industry specifically.

Social media offers a great set of tools you can experiment, from posting organically at no cost, to creating paid campaigns designed to target a specific audience and generate leads. If your budget is tight, start small, measure your campaigns, track results and learn what is working and then grow from that.

Once your marketing team has done the relevant research on the marketing channels you would like to use, determine a cost for 2023. Then determine if you can afford all of this or if you need to pull back in some marketing efforts in order to maximize your return on investment.

It is important to note that some of your spend may be fixed while other costs can be recurring. For example, email marketing services and CRM may come at a monthly cost, while your social media paid campaigns may vary significantly every month.

There are also a variety of other marketing spends you need to look into, such as hiring a professional digital marketing agency or a new in-house designer. It is important to take all of this into consideration when calculating your budget for the coming year - you do not want to be blindsided by costs you were not prepared for.

5. Measure and Amend

Once you have your marketing budget in place, it is important to remember that it does not have to be set in stone and fixed. There will be many times that you may have to change your plans, for example: a new product comes on the market and you want to capitalize on it through a new social media platform. Also consider unexpected business impacts such as those that most businesses have faced in 2020 with the COVID-19, so it's important that an element of your marketing strategy remains fluid and dynamic allowing you to make swift changes, should they be required.

For any business, knowing what is working for your campaigns and what strategy is helping you reach your marketing objectives, is more important than sticking to your spend rigidly. You see, your marketing budget can not always be completely set in stone, and your spend may move from one platform to the other as you learn what works for your business and what does not.

The key is to always be measuring, tracking and monitoring your marketing. By always keeping a close eye on your campaigns and strategy, you will be able to learn what is generating the Return on Investment that you need, and once you know this, you can continue to invest in that specific strategy or platform. If you notice that a platform is not delivering on your objectives, you are able to then decrease or cut your spend on this platform completely and re-budget for where it works for your business.

6. Keep an eye on Trends

It is important to remember that we live in the digital age and digital marketing trends are constantly shifting and changing. This is why your marketing team should always conduct marketing research and keep an eye on upcoming marketing trends - this will also help you better navigate your budget process.

When finalizing your budget, consider using platforms and technologies such as CRMs, to ensure you can keep up with the ever evolving digital marketing playing field. For example: If you are using email marketing for your lead campaigns and lead nurturing campaigns, you will want to invest in trending features such as email tracking, contact insights and automated email scheduling - all made available through advanced CRM technology such as HubSpot.

Remember, your marketing budget should include traditional tactics but you need to do your research around emerging platforms to ensure you can keep up with your competitors and stay ahead of the game at all times.

Begin Budgeting!

The above should help guide you on the path to creating a successful marketing budget for 2023. Begin by understanding your audience and your marketing goals, and consider the channels and technology available to help make your marketing efforts that much more successful.

There is no easy formula when it comes to creating your marketing budget, and it all comes down to measuring your efforts and scaling them accordingly.