Three Steps To Setting An Effective Marketing Budget

This article is a spin-off from our podcast episode titled, “How Do You Set Up An Effective Marketing Budget?”

It’s is a common topic for most first time founders and digital marketers. Many startups make a mistake of putting in X amount for channels as the official budget without any correlation to its effectiveness or any method of measuring the success (or failure) of the Marketing Campaigns. This often leads to them spending more than they need to in the initial months, which is also when cash burn really does matter.

To answer this question we’ve got Ahmad our Director of Marketing & Learning Programs at AstroLabs. He’s also our lead instructor in the Digital Marketing Track and has advised startups on their Marketing strategy.

Raunak: Why do you think entrepreneurs have challenges with setting up an effective marketing budget?

Ahmad: It is because they come at it from the point of view of, “I wanna have a certain budget per month and I want to spend this budget on Marketing.” The problem is you cannot know if the budget you have set is effective for your business until you find a way to track your goals. Only they can you determine if your marketing spend is effective for your goals. So people formalize a budget without even determining a way to measure the effectiveness of the spend versus their goals.

There is an old saying that goes like this, “Half of your marketing budget is wasted, but you just don’t know which half.” Now with Digital Marketing, you can know what’s wasted and what’s not. I would recommend anyone setting up a marketing budget to follow these three steps.

The first step is to clearly define what you want to track as a goal. So a goal is something that is valuable to the business, for example, if you are an e-commerce store, your goal would be to get someone to buy something from your shop. You might also have secondary goals like to have someone to sign up for your newsletter. Typically, primary goals are revenue driven. If you are a consultancy, your goal would be for customers to contact you on some kind of a form and then after that, you would try to sign them up as clients.

The next step is to figure out is how much are you willing to spend to get one goal. Let’s say you sell sneakers online and are trying to understand how much should you budget for. Let’s say you sell one pair for a $100 including margins. In that, you want to decide you want to allocate 20% of that to marketing spend. So you are willing to spend 20$ for every sale you make. This is your initial benchmark spend per

Once you start testing campaigns, you would look at the marketing channels to see if you are reaching a $20 Cost Per Acquisition or CPA in the campaign you are running. This is where the third steps happen, testing and measuring if your campaigns are reaching your goals or not.

If you are a founder or a marketer looking to upgrade your skillset and get certified, check out our upcoming Digital Marketing tracks here: astrolabs.com/academy or reach out to me at raunak@astrolabs.com

Originally published at The AstroLabs Navigator Blog.