How To Plan and Spend Your Marketing Budget

All great marketing advisers peek into your pocket before recommending anything.

Don’t worry. I won’t do the same. I will outrightly assume that you’re either bootstrapped or on a shoestring budget.

Finding resources and minding your burn are two different beasts. While we can try to be rational about managing people and money, our decision-making is driven by emotions.

Whether it’s the moment, we decide to serve expensive wine to our friends at a dinner party or pays for a club membership to get accepted in the circle. Somewhere or the other, we’re serving our emotions.

For startups, knowing where and how to invest their money is the most challenging decision. As not just growth, but their survival depends on it.

Morgan housel, the author of the bestselling book titled psychology of money, writes —

“Money’s greatest intrinsic value — and this can’t be overstated — is its ability to give you control over your time.”

While he says this in the context of managing personal finance, your marketing budget is not very different. The reason we plan and allocate budgets is to give a foreseeable future to your business.

By the end of this article, you’ll:

Understand how to use data for optimizing your marketing spends

You’ll realize where your competitors are spending their budget

Would Know how to segment your marketing efforts for short and long term impact

So, let’s talk about marketing budgets.

When I was at Mettl (my first workplace), our marketing budgets were slim, the team even slimmer. I joined when we were just four folks in marketing — A fresher, my manager, a data guy, and me. We had one goal: optimize for growth on a shoestring budget. Basically, to get a bang for our buck.

Whether it was managing two email marketing platforms, scaping emails manually for outbound efforts, or not having a marketing design function at all for a few years. All these were some decisions we took to mind our marketing spent.

We hired 15 data entry folks to scrape over 200K/yr relevant contacts to fuel our outbound efforts. To scale it, we involved our technology team in writing python scripts to scrape job listing websites and pull job listings in the last year and then every subsequent week.

All that effort would have otherwise cost $200K/year with no checks on quality and context. Do you know how much we spent doing all that? “drum rolls” $40K/yr.

Want to know what made all this possible? Conversion Rates.

Before we hired data miners to scrape databases, we used to buy contact lists from portals, communities, and media firms who spent years building their audience.

Now, some might doubt our marketing ethics, but we knew that once we place our product in the sight of our customers, they wouldn’t mind it. Even that hypothesis was made by observing data. Hear me out.

We saw that our outbound efforts on these purchased databases had a small but significant impact on our overall lead number. Our conversion rate was just 1%; on every 10 thousand HRs we use to reach, only 100 showed immediate interest.

Out of which, only about five such interests use to turns into a paying customer. Which barely covers up the cost we paid to acquire this list.

Now, you must already be thinking. I knew it! That’s not how marketing works. Agreed!

However, we didn’t see it that way as we were scavenging for growth.

We saw it as 0% loss and 100% visibility.

0% loss because we recovered what we spent and 100% visibility because now 100 more HR knows about Mettl.

That was not it. We realized the quality of paid databases was shit. Only about 60% of all lists were HRs. The rest were all random folks who were ruining our domain and sender reputation.

That’s when we decided to improvise things a little. We confide in Naval, our data guy, to scrape 1K contacts in 7 days to run our pilot. He curated a high-quality list of HR managers from public listings, and we sent a series of outbound emails to them. The result? We converted five customers. 5 out of 1000. We smashed our old conversion record by 10X.

We took this approach and applied it in everything we did to market Mettl.

The takeaway here is you need to know two things before allocating your marketing budget:

1. What’s the reach of the approach you’re planning to adopt?
2. What’s the actual conversion rate in context to your business?

Start with a micro-investment and evaluate the results with an open mind.

Understand two metrics:

1. Cost per impression or awareness (which is the cost you pay to put your product in front of your prospect)
2. Cost per acquisition

To give you an example, say if we paid $10K for a list of 10K emails of your target audience to send them a cold email. If 2 thousand people opened it and 100 people replied asking for a demo.

Then $10K divide by 2K people who opened your email = $5 is your cost of impression/awareness.

$10k/100 = $100 is your cost of acquisition.

There’s another term called customer acquisition cost or CAC, which is nothing but the average $ value you spend to acquire a paying customer.

It’s essential to know about this metric as it comes super handy when allocating your marketing budget to growth channels.

Let me tell you more ways to gather data on marketing budgets. Watching your competitors is another great way to do so. Understand how they’re acquiring traffic, leads, and customers.

You can:

• Use tools like SimilarWeb and Accuranker to approximate their website traffic.
• Track their brand keyword on BuzzSumo and where they might be trending
• Put a google alert on competitor brand keyword to where they recently got featured.
• Subscribe to your competitor emails and receive newsletters and updates which they’re sending to their audience.

All these tips will give you a fair idea about your playing field and what your competitors are doing for growth. Once you got that figured out, it’s time to realize your short and long-term priorities.

Short-term marketing activities keep you afloat, whereas long-term marketing activities anchor your growth.

I have covered short and long-term marketing activities in the previous episode.

To summarize — survival is your immediate priority. So, allocate a fixed portion of your budget to channels/activities that give definite returns, i.e., a low CPA.

However, if you’re starting and have no conversion and metrics in place, David Fallarme, head of marketing, HubSpot Asia, has some advice.

In his recent post, he said —

Some of your marketing campaigns should make ZERO sense. You should always “waste” some of your budgets. Spend some part of your marketing budget on experiments, “big bets,” and learning.

If you’re a startup in a competitive industry. Spend:

70% on “wild bets

20% on emerging trends

10% on business as usual

The point is — don’t just play it safe because you don’t know what works.

Part of your marketing budget should be dedicated to experiments and learning new things.

Know that even if marketing investments got 0% returns but offered 100% visibility, then it’s still a win.

If you like this article, then subscribe to my podcast Growth Signals for more ideas on growth and startup marketing.