How do you know whether you are over or under-investing in your marketing (or is your spend about right)?

Wouldn’t it be great if there was a formula that allowed you to work out exactly how much you should be spending on your marketing? 

Well, here’s some great news: there is. The approach is called zero-based budgeting. For anyone wrestling with questions around their marketing spend – there’s a completely transparent process that works on a product by product (rather than company-wide) basis.

It’s a technique often used by big businesses and governments but is super-helpful for smaller businesses too – and no surprise that it is popular with Financial Directors and management teams, as everything is clearly laid out. 

Zero-based budgets

Starting from a zero-base, the technique sets a clear sales objective, puts clear, precise parameters around goals, and then requests a financial commitment in order to be able to achieve those goals over a 12 month period.

Here’s how it works 

Your marketing objective statement should be precise and detailed, based on your earlier research and strategic planning work (segmenting, targeting and positioning).

Here’s an example of an entirely fictitious statement that sets a clear objective for an imaginary business that is selling a new super-fast micro-processor chip, the XRT10. 

“Over the next 12 months, we will be targeting key decision makers in the C-suite of domestic appliance manufacturers with turnover in excess of £250m, who are looking to have market-leading processing power of the XRT10 in their new devices. We currently have 2% of the available market as our customers. We aim to grow our market share to 10%. If we achieve this, it will generate sales of £1m for our business.”

This statement is time-bound (12 months), describes a specific market segment who have a need, and who have been targeted by the business. It also shows the aspiration of the marketing team: to grow the market share by 8%, (from 2% to 10%) and crucially to generate sales of £1m.

The zero-based approach would look at this statement, and then suggest that in order to to generate sales of £1m, investing £100k (10% of the £1m goal) seems entirely reasonable.

Rather than looking at last year’s turnover, or sales, or any other metric, you generate your marketing on a product by product basis.

Your next marketing budget

Next time you need to work out your marketing budget, rather than racking your brains wondering “what is or isn’t enough?”, or assigning “10% of last year’s sales”, avoid the vagueness. Try the zero-based technique instead. 

Working on a targeted segment by targeted segment approach, this method looks forward, shows your team that your plans are considered, and measurable with defined goals. Once assembled, it is clear to anyone why you need a budget and what the budget will be used for.

Armed with your strategic thinking and your required budget, you can then move on to the next part of the marketing mission: choosing your marketing tactics. 

Is 2023 the year that your marketing begins to really work for your business?

Book a 15-minute chat to see how I can help you get a better return on your marketing investment.