A marketing plan must always include the marketing budget.
As all marketing decisions have financial implications, the marketing plan must include details of how much money is needed to put the marketing strategy and marketing tactics into effect. The expected sales performance will allow to make comparisons between marketing spending and expected sales.
What is a marketing budget?
Budgets are financial plans for future time periods. A marketing budget mainly contains marketing expenditures in order to achieve the marketing plan’s marketing objectives.
In fact, the marketing budget is a key component of the firm’s overall budget (or the master budget) because sales levels and sales revenue will have such a significant influence over so many other aspects of business performance.
What does a marketing budget include?
Usually, a marketing budget will have two main parts:
- The target sales over the next budgetary time period. Target sales will be based on projected figures from past records, other market research data, including an analysis of economic conditions, expected competitors’ development, and estimates of demand elasticities, if price or promotion changes are planned for.
- The finance to be made available for marketing activities over the same period. The amount which needs to be spent on marketing must be detailed with a clear year-on-year and month-on-month schedule which should be included in the marketing budget as well.
How to set a marketing budget?
In order to set the marketing budget, the business can use different approaches to arriving at an appropriate marketing budget:
- Referring to historical budgeting figures from past years.
- Incremental budgeting based on previous periods.
- Spending the same amount on marketing as close competitors.
- Task budgeting for each marketing activity.
- Using correlation of past marketing spending and sales levels.
- What can the company afford to spend?
- Taking the percentage of sales revenue.
In summary, the marketing plan will, therefore, lay out the spending requirements necessary to meet the plan’s overall marketing objectives.
