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Setting a Budget

Allocating an effective branding/marketing budget

...the right amount, at the right time, in the right way


setting a marketing budget - graphic design adelaide

One of the most important questions that is asked by businesses (especially small to medium-size), is how much should they allocate to a branding and marketing budget. The answer to this questions relies on many variables that include, but are not limited to, the industry sector, size of the business, how much and how fast you want the business to grow, what your branding objectives are and where your brand currently sits within the market.

Independent sources define the percentage of revenue for a marketing budget to be somewhere between 5 and 10 percent of sales, (noting however that during the peak brand-building years that this can exceed 20% for pharmaceuticals, retail and B2C).

A lot of companies tend to under spend on their budgets; with the attitude that not spending will save them money. Whilst there is certainly a balance to be struck between profit margins and volume, the old adage of having "to spend money to make money" still applies. Provided that your business has spent wisely on a professional marketing plan that is tailored towards achieving your objectives and goals, then your marketing effects should be directly related to your sales revenue. Under spending on your budget in these circumstances only seeks to sabotage the achievement of your goals.

organic growth and branding campaigns

Many businesses initially grow their clientele on word of mouth alone, and some are very successful. This "organic growth" is how nearly every business starts off. However, the unfortunate truth is that sooner or later, the bubble usually bursts.

That's where building a solid branding campaign in conjunction with organic growth makes a difference. If you rely only on partial branding/marketing, or organic growth alone, you risk missing, or losing, a significant percentage of potential revenue because either customers never discovered you, or they simply were not suitably impressed enough with your branding to purchase. It is difficult sometimes to measure the negative impact of poor branding, except in contrast. For these reasons alone, it is important to build your brand correctly. It is not worth risking hundreds of thousands or millions to save a few thousand. Do it properly and you will lay the foundations for your continued business growth!

small and medium-sized businesses

The sad fact is that a lot of small and medium sized businesses fail. One reason for this is that they under spend, or fail to allocate a sufficient budget for branding and marketing to ensure continued growth and maintenance of their market position. Successful businesses realise that, if done properly, allocating a suitable budget to marketing each and every year, is a fundamental ingredient in their continued profitability and growth.

Setting a marketing Budget

Two of the main things to take into consideration when allocating a branding and marketing budget are:

  • The development of your brand; including brand and positioning strategies, refinement of brand assets,and promotional channels (i.e. logos, stationery and presentation material, online presence and websites, blogs, e-newsletter campaigns, brochures, sales presentations, advertising, etc.)
  • The expense of continuing to promote and advertise your brand into your market.

Most successful businesses allocate money, as a percentage of sales revenue, to a branding and marketing budget. This is often generally determined by their industry and their business revenue. Below is a table showing sourced guideline figures for marketing budgets as a percentage of revenue.


Revenue Marketing Budget
Under $1 million 8-10%
$1-5 million 7-8%
$5-10 million 6-7%
$10-50 million 5-6%
Over $50 million 4-5%

important considerations:

Each industry is different (as is every company) and there are many reasons as to why you might be able to deduct a few percent points from these figures (i.e. government contracts, highly specialised niche markets, etc.), or need to increase your budget by a small amount to ensure good results (i.e. some business-to-business and business-to-consumer sectors).

Please note that these percentages will also vary with where your business is at with its brand positioning. Peak brand building or re-building years meriting an increase in your marketing budget to ensure you make a successful brand impression.

 


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