How to Create a Marketing Budget [+ Free Templates]

Marketing is an all-encompassing term for activities to promote and advertise your business. Whatever you’re selling, marketing is critical to building a successful brand with long-term staying power. But if you spend too much on marketing, it can dip into company profits. Reasonable marketing budgets help businesses find the right balance.

Here’s a closer look at what you should consider when you create a marketing budget to boost sales at your business without breaking the bank.

How to develop a marketing budget

No two businesses are exactly alike, so your marketing budget will be unique compared to others — even similar businesses in the same industry. Following these steps can help guide your marketing budget decisions.

Perform market research.

Start by defining your target customer. Consider demographics, competitors, and the wants and needs of your ideal customer.

By getting a solid understanding of your ideal customer, you can tailor your marketing to that demographic. If you see any other companies with marketing strategies you admire, consider ways you can leverage a similar plan without compromising your brand’s originality.

Once you have market research completed, you can begin to create curated marketing campaigns for your target customers.

Create buyer personas.

Many businesses create an avatar, an imaginary representation of their target customer. Is your ideal customer a 25-year-old woman, a 40-year-old man, a parent, a single adult, or anything else? Do they work or live in a specific area? You have plenty of questions to answer to create a detailed avatar. Remember that your target customer may be different from you, so think outside the box when you create buyer personas.

Of course, you’ll ideally attract many people across demographic categories. Strategically, it is better to focus on customizing your marketing efforts to the needs, pain points, and desires of a specific group. As the old adage goes, if you market to everyone, you market to no one. As your business and budget grow, you can explore new audiences.

Identify your marketing goals.

Once you know who you’re marketing to it’s easier to craft targeted messaging and set specific goals that your business can realistically achieve. A popular model for goal setting is the SMART goals method. SMART is an acronym for:

• Specific
• Measurable
• Achievable
• Relevant
• Time-Bound

Getting tactical and specific about your goals can help you measure ROI and performance compared to your budget. As you reach your goals, you can create new and more ambitious goals. But you have to start somewhere, and the SMART framework can help you choose goals that make sense for your business.

With specific goals, you can figure out where your target client base spends time and focus on putting your message there.

Outline your marketing channels and tools.

In marketing there’s a concept called the four Ps: product, place, price, and promotion. The four Ps framework encourages you to think about getting your product in front of your target audience and promoting it through the most effective channels. Consider where your audience already spends time and try to put your campaigns in the right places.

Consider these popular promotion strategies when building your marketing plan:

• Social media: If your customers spend time on Instagram daily, consider starting with Instagram. If they’re more likely to be on Facebook, target your efforts there. You can create a curated social media account that’s interesting, entertaining, and helpful to your target audience. Interacting with and growing your following keeps your brand top of mind.
• Email: Email marketing keeps customers actively engaged and puts your brand in front of an existing warm audience. When you use a Square tool like the POS system,Square Marketing can automatically build an email list of past customers to keep them coming back.
• Text messaging: Most adults today are attached to their phones at nearly all waking hours. SMS campaigns can send customers deals, specials, and announcements to encourage repeat business at a low cost.
• Paid advertising: Paid advertising is tricky, as it’s easy to spend a lot of money with little results. Testing campaigns with different wording and images can help you find the best conversion rates. Also consider testing your ad strategy on multiple platforms, such as Google, Facebook, TikTok, and others.
• Local marketing: Local marketing targets a specific community or area, focusing on strategies tailored to the interests and needs of a local audience. It’s highly effective for small businesses, as it builds a strong, loyal customer base within the community through personalized, relevant outreach. Local event sponsorships, neighborhood-focused social media campaigns, partnerships with other local businesses, targeted SEO practices, and community-based promotions and discounts are examples of marketing with a local focus.
• Events: Hosting and sponsoring events can lift your business profile and help embed your business into the area. Offering special deals, working with local nonprofits and schools, and getting your business out into the community can raise awareness and get people excited about your offerings. Implementing regular events into your marketing budget can also help you produce another revenue stream. Everything from cooking demonstrations to fashion classes can strengthen your relationship with customers and spread brand awareness.
• Website: Your business website is a cornerstone of your business. Even for businesses that have brick and mortar storefronts, having an online destination can work to keep regular customers engaged and up-to-date with your brand and can help new customers get familiar with your offerings. Square Online can help businesses build mobile-friendly websites that satisfy customers wherever they access your link.
• SEO: Search engine optimization (SEO) is a method of improving your website and backlink profile to increase your rankings in search engines such as Google. Best practices include maintaining a well-designed website and working to get links from other websites. SEO is a long-term marketing strategy that likely won’t yield quick results.

Calculate your budget.

Now it’s time to calculate your marketing budget. Think of your marketing budget as a spending plan for everything related to advertising and other marketing.

Here are three common methods used to decide on a marketing budget:

• Revenue-based: Revenue-based budgets allocate a specific percentage of business income to marketing. For example, you may allocate 7% of your revenue to your marketing budget. Depending on the business, you may want to allocate anywhere from around 6% to 12% of revenue to marketing. Every business is unique, so there’s no exact answer that’s right for everyone.
• Goal-driven: Goal-driven marketing relies on setting aside a specific amount for specific goals. For example, you may want to spend a particular amount to generate a defined number of online conversions or email list subscribers.
• Top-down: With top-down budgeting, business owners or managers set a specific dollar amount as a marketing budget, and the dollars are divided among marketing activities until the budget is exhausted.

Factors to keep in mind when deciding on a marketing budget:

• Shifts in consumer preferences: In marketing, adaptability is key. Constantly reassess and reallocate your budget to align with evolving consumer preferences and emerging platforms. Avoid relying solely on past strategies, such as social media success, and be open to exploring new marketing avenues to maintain relevance and growth.
• The value of current customers: It’s crucial to balance your marketing budget between acquiring new customers and retaining existing ones. Invest in engaging your current customer base through loyalty programs and personalized communication, as this can be more cost-effective and lead to increased brand loyalty and advocacy.

Track spending and measure performance.

Now your marketing plan is set, and it’s time to execute. As you engage in various marketing activities, keep track of your spending on each and track the results.

As you track results you may notice some marketing spending leads to excellent results, while other investments don’t turn out well. The key to a successful marketing campaign is to be agile. If something’s not working, you can take it out of your marketing plan. If something produces outstanding results, double down and grow that part of your marketing budget.

With good analysis and an understanding of your return on investment (ROI), you can make better marketing decisions in the future.

Use our marketing budget template for your business.

You don’t have to go into the marketing budget process without any resources or tools. We’ve created a unique marketing budget template you can use to map out your marketing spending plan. Download our free marketing budget template to get started on the path to marketing success.

Download template