Considerations When Finalizing Marketing and Advertising Budget for 2023
It’s that time of year again.
With quarter four already underway and 2023 quickly approaching, companies must take stock of what went well and make plans to prepare for the year ahead– which means reviewing and establishing budgets.
Building and Adjusting Marketing and Advertising Budgets
One of the most important parts of planning for next year is building and adjusting marketing and advertising budgets. In order to prepare for success in 2023, companies must take time to align marketing and advertising spend with organizational goals, as well as with where their target audience exists. While the process is complex and time-intensive, a well-laid plan can go a long way in terms of setting a company up for market success.
Here is what to consider when building your marketing and advertising budget for 2023.
Marketing Spend Target Percentages
When building a marketing budget, the first step is to figure out the percentage of revenue that will be allocated for marketing and advertising spend. The guidance for the target percentage varies year to year and company to company. This year, according to the U.S. Small Business Administration, companies with less than $5 million in revenue should aim to allocate 7-8% of their projected revenue to marketing budgets, while larger, more established companies should allocate closer to 9.5%.
The key here is to base allocations off of revenue projections, in order to account for the scalability of the business and its functions. Marketing efforts are crucial to building and maintaining brand growth, and they should be funded based on the growth that is expected to be made.
Foundational Infrastructure Items
Another important consideration to make when developing a marketing budget is to ensure that enough funding is allocated to establishing and revising foundational infrastructure items. These items include, but are not limited to:
- Martech investments and expansions – Companies should evaluate how much they would like to spend on building a martech ecosystem. To do this, they should consider things like artificial intelligence, natural language processing, software platforms, and virtual or augmented reality. These investments are core tenets of a marketing strategy and they should be clearly defined and outlined for the year ahead.
- Market analytics and marketing channels – Brands should review market analytics and define and revise marketing channels as necessary. Buyer personas and marketing channels serve as foundational structures for every marketing and advertising strategy. Therefore, they must be evaluated and re-defined every year, in order to ensure relevance and effectiveness.
- Alignment of sales, marketing and success departments – Aligning sales, marketing, and success departments can enable companies to reap the benefits of heightened synergies, increased consistency in customer experience, and improved customer retention. Integration efforts, however, require thoughtful planning and preparation, which necessitates adequate time and resources. As such, adjustments related to integration should be accounted for during the budget review process.
New Upcoming Initiatives
In addition to considering foundational items, brands should also plan to allocate marketing spend for advertising strategies related to new initiatives, such as campaigns, product launches, and mergers and partnerships. These initiatives are likely to span a few weeks or months, and they relate to key accounts or markets, as opposed to serving more generalized purposes.
- New campaigns – Most campaigns typically last for 45-60 days, so brands should plan to allocate funds for 5-8 new campaigns each year. These campaigns will vary in cost, depending on if they focus on content marketing, digital advertising, experiential advertising, or other types of strategies. Integration efforts to align marketing strategies should also be accounted for here. Companies should plan out each campaign and adjust their budgets to allocate funding based on the strategies used.
- Product launches – Brands should also plan for marketing spend related to upcoming product launches throughout the next year. Costs for all aspects of a successful launch should be identified and included in the budget planning process.
- Mergers and partnerships – Many companies identify and create strategic partnerships and mergers throughout the year. While these collaborations are often highly beneficial, they also require companies to undertake a few expenses. These costs should be included in the annual budget.
Contextual Changes and Trends
Lastly, companies should adjust their budgets to account for contextual changes and trends within the industry. In 2023, brands will continue to experience high levels of uncertainty and economic ambiguity. Therefore, their budgets will need to be built with flexibility, so they are agile enough to change based on economic demands. This includes allocating funding for labor changes, especially considering the widespread labor shortages that are likely to continue into 2023. Additionally, companies will need to continue to rebuild their supply chains, with a focus on optimizing efficiency, especially as industries continue to return to pre-pandemic purchasing levels.
Finalizing Your Marketing and Advertising Budget for 2023
As 2022 comes to an end, companies should pause and reflect on what went well and plan for the year ahead. In order to prepare for success in 2023, brands should thoughtfully review and refine their marketing and advertising budgets. By accounting for the considerations above, organizations can leverage marketing and advertising spend to maximize efficiency, increase synergies, and improve ROI in the new year.