9 Ways to Determining Advertising Budget

1306 Words Aug 13th, 2010 6 Pages
9 Popular Ways to Determine Your Marketing Budget

1. Percentage of revenues
This is by far the most talked about method of determining your budget. This method works by taking a fixed percentage of your revenues (that’s every penny your company brings in) and allocating that amount for marketing. The most commonly used numbers are 5-10% (generally for bigger businesses), 20% (used more for small businesses), and 2-5% (very large companies). Picking the percentage that works best for you will probably take some trial and error.

Pros: It’s an easy and understandable answer. It makes for great cocktail party and networking event rumors.

Cons: It really isn’t very accurate. In fact, it’s not accurate at all. Also, with small or new
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Once you have the averages, you can refine the actual costs based on your own situation and experience.

Pros: This can be a very accurate way to project what it will cost you to survive in your industry, and it’s much less generalized than other methods.

Cons: The industry average is going to include major players, so if you’re bootstrapping this budget could be way out of reach.

7. Spend nothing, market for free
You might be amazed at how many people think it’s a good idea to spend nothing on marketing. While I don’t think it’s possible to launch a company without spending anything at all on marketing, you can actually come close. At the end of the day, though, it usually comes down to this—if don’t want to spend any money on marketing, then plan on spending a lot of time. Time is money, money is time. If you don’t spend one, plan on spending the other.

Pros: It’s FREE of course. It doesn’t cost anything, and you can give up on budgeting right now.

Cons: It isn’t actually free; you’ll end up spending a lot of time on marketing if you follow this budget.

8. Desired market share
This is another quick calculation that can give a relatively accurate budget, so long as you have good data to start with. The projection is based on a goal of attaining a certain percentage of your market. The first step is to accurately define your market, the second step is to
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