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This is probably marketing’s oldest question. “How much of your revenue should you reinvest in marketing?” The answer is never easy, but Coegi’s girlfriend Elise Stieferman shares her four principles for 2024.
With new leads and sales goals, increased market share pressure, and increased competition, planning your marketing strategy for the new year can be a daunting task. Marketers with high expectations ask their CEOs and CFOs important questions: The question is, “How much budget do I have available to achieve these goals?”
Determining the “right” marketing budget is slightly different depending on how clear your marketing goals are and which channels your brand is prioritizing. Get data-driven answers using four key questions.
1. How much do you reinvest into your company in marketing (relative to revenue)?
There are inevitably different answers here, with experts claiming that reinvesting between 1% and 30% of profits is necessary to achieve the desired growth.
While there is no silver bullet, Nielsen estimates that the median brand will reinvest 3.8% of revenue into advertising in 2022, and at least 1-9% of revenue will need to be reinvested to remain competitive. discovered. You may need to increase this percentage if you have a brand that has a large market share in the category you are trying to compete with.
Additionally, brand and category maturity can influence the budget mix between brand initiatives and performance-oriented marketing.
2. How much are your competitors spending?
Your marketing strategy should be far from a “copycat game” where you say, “My competitors are spending $X, so I need to match that.” But it’s important to know what your direct and indirect competitors are spending and where they’re investing that money (in channels and placements). If your brand invests his $100,000 in marketing, but the category leader invests his $10 million or more, your brand will be remembered among the same audience. It can be a struggle.
Still, there’s no need to despair if this is all you have at your disposal. Consider the sports drink brand Body Armor (now owned by Coca-Cola). Body Armor (owned by PepsiCo) tripled its market share in two years, taking on Gatorade by targeting niche communities and building a brand following at a fraction of Gatorade’s budget. .
The key for challenger brands is to identify glaring white spaces and avoid highly competitive and saturated spaces.
3. Who is your target audience? How many channels are you trying to reach them on?
Achieving sufficient reach and frequency are key KPIs that brands need to drive desired results, regardless of where their goals fall in the traditional marketing funnel. Using data-driven planning tools, marketers can get back the budget they need to maximize their chances of reaching their audiences with sufficient frequency (usually because branded ads have staying power). It takes 5-10 cross-channel exposures to start lasting).
Planning a budget based on your audience is a dynamic process that requires consistent analysis to understand how your audience is responding to your ads compared to your marketing goals. There needs to be a deep connection between your brand and your audience to consistently meet their needs and expectations. Therefore, do not expect this audience sizing and scaling analysis to remain constant from year to year. Instead, stay agile to adapt to your audience.
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4. Do you want an evergreen drumbeat, a loud tent pole moment, or both?
Evergreen marketing is necessary for brands that aim to have a consistent presence in front of their target audience and slowly build brand awareness and share over time. This is a long gameplay. Patience is required to see tangible results, especially when it comes to lower-funnel sales-related growth. However, doing so effectively often requires a large budget.
An evergreen marketing strategy won’t be achieved by simply keeping the lights on for paid search campaigns. Instead, you need to build an omnichannel, ecosystem strategy tailored to where your target audience most often spends their time and engages the most. From there, assess the gradual improvement in share of voice and self-recognition at each period. This could be a slow burn that shows modest growth when looking at quarterly data, but annual analysis could show a bigger story.
Conversely, tent pole moments should be considered when determining your marketing budget. These are shorter marketing sprints that focus on important business events and cultural moments that impact consumers’ lives. Think trade show season for B2B brands, peak sales season for CPG brands, or smaller moments like local events and festivals that draw crowds for regional brands.
These activations often require large budgets as multiple brands compete for the same promotional opportunities. The potential to reach relevant audiences is huge.
As you navigate complex budgeting, remember that success often lies in finding the right balance. Reflect on these insights, evaluate your budget, and proactively adapt to your audience’s evolving needs. Always prioritize your business goals and objectives when determining your budget. Success awaits your marketing team.
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