Chloe Washington, HubSpot
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.
In this post, we’ll cover:
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.
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
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 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.
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.
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.
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.
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.
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:
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.
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.
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 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?
Send your budgets off for internal review.
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.
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.
Marketing leadership approves the budgets. Now it’s time to get out there and start doing marketing!
Don’t fall prey to the pitfalls that can happen surprisingly often during this process.
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:
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.