Best Practices for Building out a Marketing Budget

Welcome back! This post is part two of a three-part series on building and managing a marketing budget.

This the second installment of our budgeting blog series that covers all the essentials from budget structure to management tips. Marketing budgets don’t just show where funds are invested; they’re the ultimate expression of strategy for any marketing organization, from enterprises to small businesses. Having an optimized budget is vital, and we’ll make sure you get there.

In this post, we’ll provide recommendations for building out a marketing budget. These are things to keep in mind as you itemize a marketing budget with all the activities and funds to support your marketing strategy for the upcoming quarter or year.

As we learned in the previous post, the primary goal of structuring your marketing budget is turning chaos into order. Developing a rock-solid budget organization brings your investment numbers from chaos to decision-driving assets. 

However, before that step, your marketing budget must be built out. What does that mean? Determining budgeting direction, preventing roadblocks, and finally hashing out the details of your actual budget. This section will cover everything you need to know about building out your budget as well as some things to avoid. 

A well-built budget is the first step toward investment visibility and ROI, so let’s get building.

Building and Managing a Marketing Budget

In this post, we’ll cover:

  • Top-down vs. bottom-up budgeting
  • Building out a marketing budget step by step
  • Avoiding marketing budget pitfalls

What is a Marketing Budget Plan?

This type of plan is the way to organize your budget to best accomplish your marketing strategy. The plan includes all of the programs and activities your organization wants to include in the quarter or year, and what they will cost.

What Are the Types of Marketing Budgets?

There are two basic approaches to marketing budgeting: top-down and bottom-up. We’ll explain each one and share our recommended approach for your marketing strategy

What is Top-Down Budgeting?

Top-down budgeting is done according to marketing investment targets. Usually set by the CFO and/or CMO, these targets divide dollars up into several big buckets of spend.

marketing budgeting

Marketing leadership will typically divide the total marketing spend available according to functional area of marketing (field marketing, product marketing, digital marketing, etc.) or by cost center. Then they’ll communicate these targets to the leaders of each of these areas.

Next, these mid-level marketing leaders (a director of field marketing, for example) will further divide their bucket of spend in a way that makes the most sense for their team.

Not every leader will categorize their allotment of the budget the same way—in fact, it’s quite common for marketing spend to be organized differently within the same organization. For example, a software company’s field marketers may divide up their spend by region, whereas their corporate marketers may divide spend according to an analyst framework.

Once this secondary level of prioritization is done, it’s up to the individual marketers on the various teams to populate their budgets with the programs and activities they feel are the best use of the dollars they’ve been allocated to serve their marketing strategy.

Will you focus on email marketing? Content marketing? Decide what programs are most important for your organization, and fill in your budget accordingly.

financial and budget management

Uptempo Budget Tip:

Often, marketing investment targets can change between the time when they’re first announced and the beginning of the new fiscal year. Changes like these can be disruptive—especially when you’ve already built what you thought was a great marketing plan!

In this situation, it’s time to negotiate to retain those budget dollars. You’ll have to make a business case to protect the marketing spend in your area.

What is Bottom-up Budgeting?

When individual marketers start with a laundry list of programs and activities they’d like to spend money on and, one by one, pick which of those will be added to the budget, they’re creating their marketing strategy using bottom-up marketing budgeting.

Once all the tactics are added to the budget, the marketers make additions or subtractions as necessary, in order to stay within the spend targets, they’ve been given.

A pure bottom-up approach to budgeting is common in startups, small organizations, or businesses with less mature marketing operations functions.

Uptempo’s Recommendation:

When we help enterprise marketing teams get set up with their marketing budget processes, we recommend a hybrid approach that combines top-down and bottom-up marketing budgeting. The most effective approach is to start with top-down target setting, followed by building a bottom-up activity plan.

This approach gives marketers the autonomy to plan their budget the way they feel is most appropriate, while still staying true to the overall priorities marketing leadership has set out. And remember that effective marketing budget planning takes time! We recommend that organizations start the process 3-6 months before the start of their fiscal year, so the various marketing teams have ample time to define those tactical plans.

How to Create a Marketing Budget

Creating a marketing budget from the ground up can look like a challenging process at first, but once you have the steps, you’ll be a pro in no time.

Building Out a Marketing Budget: Step by Step

When it’s time to actually build out your budget, here’s what the process might look like. Of course, there will be lots of organization-specific variations, but this basic structure is widely used:

Step 1Recieve Spend Targets

Your marketing team receives its spend targets from the top-down budgeting process undertaken by your leadership or Marketing Operations. Now you know how much money you have to spend on marketing efforts for the year, so it’s time to sit down as a team and make some decisions.

Step 2: Group Activities

List all the activities your team may want to execute during the year along with their estimated costs and organize them into relevant groupings. Make sure to consider marketing activities or commitments you’ve made in the previous year. Thanks to accruals, those items will be part of the marketing budget of the year in which they occur — not the year during which the cash went out the door.

Step 3Budget Population

As you pare down your list to only include what you believe will fit into your spend targets, start populating your budget in whatever system you use (Uptempo, or a spreadsheet). Note all the information about each line item you may need to state for reporting purposes, such as vendor, target audience, product line, region, CRM campaign, etc. In Uptempo, this is done with the details panel; in a spreadsheet, it’s done with additional columns. The fully customizable details panel captures all that crucial extra information about each budget line item.

Step 4Budget Refinement

Step back and assess each budget. Does it align with your targets? Refinements are likely necessary. This is when the hard questions typically emerge: what can we take out, and what should we leave in? What will the impact of those decisions be?

Step 5Review

Send your budgets off for internal review.

Step 6Additional Adjustments

At this point, there’s a process of adjustments, with the budgets going back and forth between the marketers who’ve built the budget and their leadership. Two-week cycles are common here: two weeks to define an initial plan, two more weeks for the first review, two more weeks for additional adjustments, etc. On average, the full process may take around two months, although this number can vary wildly — especially if the numbers have to be approved by a board of directors.

Step 7Leadership Review

Marketing leadership assesses the budgets. They’re looking for two things:

1. Compliance: Did all the marketing teams plan the way they should have, and did they do it on time? Do their budgets align with their investment targets?

2. Performance: Marketing leaders will spend time analyzing each team’s intended uses of their funds. They’ll pay particular attention to whether the planned marketing investments adequately support overall corporate objectives.

Step 8Approval

Marketing leadership approves the budgets. Now it’s time to get out there and start doing marketing!

How to Avoid Common Marketing Budget Pitfalls

Don’t fall prey to the pitfalls that can happen surprisingly often during this process.

  1. Not remembering marketing activities that carry over from one budget period to the next.
    It’s easy to forget about subscriptions, retainers, and pre-paid vendor agreements (such as conference exhibit fees). These are non-negotiable pieces of this year’s budget, and failing to include them in the plan will create confusion later on.
  2. Not capturing your originally planned budget amounts.
    Undoubtedly, your budgets will undergo many modifications throughout the year. The line items will change, and so will the amounts. This is natural. As this happens throughout the year, too many organizations simply overwrite the original budget. They lose the ability to look at metrics such as plan vs. forecast (to help stay on budget) and plan vs. actual (to see how accurate the budget planning was). Make sure you have a way of capturing your original budget plan.
  3. Not allowing enough time.
    Year after year, we hear from organizations who are taken by surprise by how long the budgeting process can take.

Advanced Marketing Budgeting & Planning

In this post, we’ve covered the basics of building out a marketing budget. But for organizations looking to become more strategic in their budgeting processes, there’s much more to know, such as:

  • How to plan for scenarios: Pinpoint in advance what your budget would look like in the event of budget boosts, cuts, or other shuffles.
  • How to plan in alignment with corporate strategic priorities: The highest-performing marketing organizations tie every single budget line item to one or more of the overall priorities of the business. If you can demonstrate exactly how the way your marketing plan supports the company’s big goals, you’ll be in a far better negotiating position if your budget dollars are threatened.
  • How to plan for revenue impact: The ultimate in marketing budget planning: demonstrating how your plans will generate revenue for the business.

For more on each of these topics, check out A Guide to the New Era of Agile Marketing Planning.

Also on this topic:

Learn how Forrester recommends addressing strategy shifts with an agile budget through their Strategic Budget Allocation Process.

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