Business Finance Homework Help

Marketing Budget

A marketing budget can be compared to a personal budget – if the budget is not solid, you could accidentally or unknowingly overspend on expenses, such as marketing costs. The amount required for a marketing budget can be difficult to define, so entrepreneurs should consider using a mix of directional, creative, and call-to-action advertising. Something to keep in mind is that while each category has traditional methods, those methods can overlap; it depends on the purpose of the platform. For instance, social media may be used in any of the three categories.

DIRECTIONAL ADVERTISING

Directional advertising is for customers who already know what they need and turn to advertising that directs them to the exact business they are looking for.

CREATIVE ADVERTISING

Creative advertising is any type of advertising that can be used for branding, such as billboards, radio, and television. This is a powerful method to build the business over the long run.

CALL-TO-ACTION ADVERTISING

CTA, or call-to-action advertising, is any advertising that encourages the customer to make an immediate buying decision. Traditionally, this has included direct mail, coupons, newspaper, or in-store ads.

Marketing Budget Continued…

A common tactic for establishing a marketing budget is to designate a certain percentage of gross revenues to marketing. This usually ranges from 2% to 5% for marketing. However, these are not set percentages, as this will really depend on the industry you are in, the size of your business, and the growth stage of your business. If you are in the initial start-up phase of your business you may spend up to 20% to help with brand building.

Here’s an example: Gross revenues for the upcoming year are expected to be $100,000 for a start-up business. You decide to allocate 5% for the marketing budget, which may look like this:

• Expected gross revenues = $100,000
• 5% dedicated to marketing = $5,000 budget
• Direct Advertising = 25% of marketing budget (of the $5,000) = $1,250
• Creative Advertising = 50% of marketing budget (of the $5,000) = $2,500
  • Television = $2,000 in a local, specific market to keep costs down and directed at target customer.
  • e-mail newsletters = $500
    • Free to create and post (no tangible materials)
    • $250 in employee labor and time to create
    • $250 in computer software to create the newsletters.
  • Creative advertising has a main purpose of building the brand.
• Call-to-Action Advertising = 25% of marketing budget (of the $5,000) = $1,250
  • In-store ads = $1,250 for the year; various promotions to occur once a quarter.
  • Using for promoting the business.
• • Yellow pages = $1,000 during slow sales month to try to increase sales
  • Twitter = Free to post, $250 in employee labor and time to post and track Twitter account
  • Using for promoting the business.