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How to Effectively Allocate Your Marketing Budget

By Jon MacDonald
7 minute read | Last Updated: October 23, 2017

Need insight for allocating your marketing budget most effectively? Explore our recommended approach for maximum value and ROI.

When it comes to the marketing budget, there’s only so much funding to go around. Everyone on the team wants a big piece of the pie, but there’s not enough pie to please them all.

Ecommerce VPs often tell us their budget planning often turns into a power struggle. When all’s said and done, a few people are happy, but others are in despair, thinking “How can we get the work done without the money to afford it?”

Morale can bottom out, and optimism can turn into focusing on the impossible.

Marketing leaders need insight into how to allocate their marketing budget most effectively, and that’s exactly what this Insight is about.

We’re going to present a rational, numbers-based, and fair approach to budgeting that can cut down on the headaches and end up boosting team spirit instead of throwing water on the fire.

This post will highlight our recommended approach to allocating your marketing budget for maximum value and ROI.

Our recommended approach to allocating your marketing budget for maximum value and ROI Click To Tweet

A Simple, Effective Path to Creating the Marketing Budget

When we look at the proposed marketing budget breakdown with our clients, one thing is almost always apparent: imbalance.

Whether because one manager carries more influence than another, past experience pushes more of the chips in a certain direction, or some other reason – marketing budgets tend to go heavy in one area and light in another.

To counteract that tendency, we urge management to create three primary budget columns: Branding, Traffic, and Conversion Rate Optimization.

Branding heads the first column

Branding seeks to position your company as the leader in your niche. When someone brings up the products or services you supply, branding helps make sure you’re the first name mentioned next.

This column will likely be the hardest to track a return on investment, but no matter how well you do at traffic and CRO, if people don’t know, like, and trust your company, sales are going to be tough to get.

TIP: All three of the columns are critical; that’s why we chose those three. If one fails, they all fail… but branding is where the process begins. The more people know and like about you, the easier the rest of the marketing flow will be.

Traffic heads the second column

We place paid and organic traffic in the same budgeting group. Both are concerned with generating traffic, and both require funding.

It’s a mistake to think of organic traffic as “free.” It is not. Whether you pay (internal or external) for search engine optimization (SEO) work or (more sustainably) prepare content for your website to draw visitors in, organic traffic requires funding.

Most companies should look first to their organic (owned) traffic for a steady, ample flow of visitors – then use paid traffic as a way to augment and shore up the numbers. Beware of underfunding the organic effort, then ending up having to overspend on advertising and pay-per-click campaigns.

You can do an excellent job of branding, but if you don’t have traffic lanes set up to get your offers in front of your prospects, how will you make sales? Branding is critical to marketing, but so is traffic.

marketing budget

Conversion Rate Optimization (CRO) heads the third column

Your audience knows who you are and believes you can solve one or more of their problems better than anyone else.

You have traffic systems in place to direct those who need the solutions you offer to your website and landing pages.

Sounds like the perfect set-up, but one huge factor is still missing: CRO. If you struggle to turn visitors into buyers, you’ve spent your branding and traffic budget unwisely.

If you struggle to turn visitors into buyers, you’ve spent your branding and traffic budget unwisely. Click To Tweet

You’re not in business to pay for getting people to your site, you’re in business to help them through the process of buying from you. And THAT is the job of conversion rate optimization.

Marketing Budget Examples: How CRO Can Multiply ROI

Remember how we said most marketing budget plans are out of balance? Typically, that means either branding or traffic activities are overshadowing the others. CRO activities are often seen as a one-shot process, resulting in a ‘set it and forget it’ attitude.

That’s a huge mistake.

Let’s look at how the numbers can work for you or against you.

marketing budget

In the example above, the budget split gave branding and traffic an equal stake in the campaign. CRO got the remainder.

The company invested $50K and created $200K in sales. That’s a healthy return, and they’re happy with the results.

What if the ecommerce VP decided to try boosting results for the next campaign by budgeting for a much-needed conversion rate optimization tune-up?

Let’s look at how that scenario could quite easily play out…

marketing budget

These numbers are typical of the results we see at The Good all the time. If anything, they are downplayed. Ecommerce managers are often mystified when they take a look at calculations on the potential returns from conversion rate optimization activities.

There is magic in the math. CRO can do more than double ROI – we often see companies double or triple (or more) what was already a pretty good return.

There is magic in the math. CRO can do more than double ROI. Click To Tweet

In the example above, the total budget for the campaign didn’t change. The allocation rates, however, moved a portion from both branding and traffic to the CRO column.

Because conversion rate optimization tactics serve to both increase the conversion rate AND the average order value, total sales and ROI more than doubled – even with HALF the traffic!

Our Marketing Budget Allocation Recommendation

That’s a quick look at possibilities. The two marketing budget examples above are absolutely realistic scenarios. We’re not saying you must double up on CRO and cut the other two major considerations in half in order to see benefits. We’re simply highlighting the incredible value and potential if you begin moving in that direction.

Here’s the strategy we’ve found to work best for most companies:

1. Take a close look at your current budget and results. Divide your marketing expenses up into branding, traffic, and CRO activities. Compare them.

2. Then look closely at the current situation for each of the three areas. Have you done an excellent job at branding, but traffic is way lower than expected? How long has it been since you looked at your path to sales through a CRO lens? What are the strengths and weaknesses in each area? Schedule a 15-minute call to help uncover the top 3 things costing you sales.

3. Armed with the information you’ve collected, determine where branding, traffic, and CRO rank in their effectiveness and health. If they’re about equal, then give each one-third of the budget. If one is lacking, give it a larger part of the budget until it is up to standard.

If you’ll try that simple process, and apply it to your next marketing budget breakdown, you’ll find a data-based allocation takes personalities out of the equation and gets everyone back on the same team.

Once it’s clear to all concerned that each column must be vital if the other two are to perform at peak levels, then it becomes everyone’s job to support each other for the common good. Yes, that should be a given – but it’s often not. This exercise makes the symbiotic nature of the marketing process come alive.

Will You Give This Simple, Effective Marketing Budget Process a Try?

We’ve tried to keep it simple (because it is). The goal is to shore up any weaknesses and get all three marketing pillars standing strong – then to give each an equal portion of the budget.

Get all three marketing pillars standing strong Click To Tweet

Does that make sense? If you’ve any questions, whatsoever, contact our team for clarification and guidance. We do this stuff constantly, so chances are good we’ll be able to pinpoint your problem area and help you get past it.

For further reference, we’ll end by listing resources for additional reading.

Don’t dread the next marketing budget planning cycle. Try this simple plan and avoid the headaches. Shoot for the best next quarter or next campaign ever.

Break records, and do it as a team. Branding, traffic-building, and CRO need one another daily. This process makes that clear to all.

Resources:

About the author: Jon MacDonald is Founder and President of The Good, conversion rate experts who deliver more revenues, customers, and leads. Jon and the team at The Good have made a practice of advising brands on how to see online revenue double through their conversion rate optimization services. Connect with Jon on Twitter.

1 Comment

  1. Wow content indeed and personally I can’t agree more on this. I am a digital marketer and working with medium-sized and small companies. Most of the time I have seen that they are not interested investing in CRO. As a result they fail in converting traffic into sales which ultimately costs them much higher as the customer acquisition cost goes high.
    I am going to share this post on all my networks and with all my viewers. I am also going to use this as an example of how effective conversion optimization can get more revenue to one business.

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