How to Set and Maintain a Marketing Budget

The marketing of a product, a project or a company demands functional, intellectual and, of course, financial investment. Excessive saving on marketing could freeze sales and, literally, kill business. However, uncontrolled marketing expenditures unavoidably lead a company to a fiasco, inasmuch as an increase in the marketing budget only stimulates a company’s profits to a certain level.

Accordingly, to conduct business successfully, a company must know how to set the optimal marketing budget to increase sales. Furthermore, expenditures on marketing must not exceed the requirements for resolving the set task. The correct understanding of what comprises marketing expenditures and the intelligence of good planning are among the fundamental skills of a marketing specialist. At the beginning of any project, the first thing that there must be is a developed strategy, and of utmost importance is a financial strategy. Consequently, this article is dedicated to what a marketing specialist in the area of commercial real estate must contemplate prior to putting the final touches on setting the budget.

General Principles

In scientific practice it is accepted to allocate several approaches to forming a marketing budget. Several of them could seem too complicated and too difficult to fulfill, but all of them have a right to exist. To promote a company or project on the B2B market, it is more sensible to combine several methods, resulting in an average-weighted figure which will most likely correspond to the optimal expenditure on marketing.

The plan of action is simple, as at the beginning one must identify the tasks needing to be resolved in the near future. Then one must calculate the minimum budget to resolve them efficiently. Then correlate the calculated figures with the previous year’s budget (if the project is beginning from scratch). If possible, analyze a competitor’s expenditures, with which your expenditures should correspond; otherwise, the marketing activity risks getting lost among your competitors, or, on the contrary, they could be too large, although the same effect of edging out your competitors could have been achieved with less funds. Possibly you may also have to consider that management determines the marketing budget as a percentage of profit (or turnover). Moreover, keep in mind that in Russian developer companies it is set at 0.1%-1%. If you are not working for a developer company, you could refer to world practice in the B2B segment, which spends 4% of profits on marketing.

Spell out All the Items

What are these inconceivable expenditures going toward? A marketing expert must always be ready to answer this question posed most likely by the director or co-owner of the business. To answer a similar question thoroughly, it is worth itemizing the fundamental articles of expenditure integral to implementing a full-fledged marketing program.

Which articles, for example, belong in the marketing budget to support a class A business center? Even a person not working as a marketing expert immediately cites expenditures on advertising, which is completely reasonable, given that ultimately this is one of the most costly stages of the company’s marketing strategy. This stage, naturally, is better specified as communication, having added costs on working with journalists (conducting press events and preparing informational materials), advertising production, participating in industry conferences and exhibitions, organizing special events, posting information on the Internet and other direct-marketing promotions.

Marketing specialists also add to communication the necessary expenditures on market research. This should be conducted prior to project development and when developing a product (in our case this is developing the concept with a defined functional purpose for the building, its class rate, a choice of a target group of consumers and the creation of an architectural and technical concept of the building), as well as conducting post-analysis effectiveness.

Sales promotion could also be added to this list, although many mistakenly figure that sales promotion is effective only when mass selling goods in the B2C segment. In actuality, similar strategies are used in commercial real estate, for example, the lowering of lease rates when a tenant leases a large amount of premises or offering a period of lease deferral. This promotion is nothing more than missed profits for the company, which can be included in the marketing budget column under “promotional costs.”

To complete the document, it is only necessary to enter the article which is easily forgotten, but is very important to include for understanding real marketing expenditures. Indeed, first of all there are expenditures on the team of specialists fulfilling the program. For a market specialist these expenditures may seem to be outside the sphere of marketing (inasmuch as this item is included in the budget under personnel); however, in the scope of the whole business, these are expenditures on the marketing department, which are indeed expenditures on marketing.

When planning and budgeting for non-standard marketing promotions and events, it is important not to forget about the outside world, whose adaptability could drastically change the course of your own project. Accordingly, to be one step ahead always, you must learn to include expenditures on a database, which includes information on competitors’ buildings, monitoring and analysis of the market, monitoring of the media and monitoring of your competitors’ advertising activity.

How to Assess the Effectiveness of Expenditures

The second and more complicated examination question for defending the marketing budget is, “what sales will we receive?” The answer to this question will not provide a concrete figure. This is because B2B marketing is not a well-defined statistic of advertising exposure clearly connected to the profits generated by promotional devices for sales and exact earnings prognosis that every spent marketing dollar brings.

More than likely it is not possible to evaluate exactly what has caused the increase in profits – perhaps it was concrete marketing steps, or perhaps it was the general situation on the market; however, there are a number of widely applied methods which assist in determining the degree of effectiveness of individual marketing devices, qualitatively or quantitatively. In the B2B segment the most valuable data can be obtained by analyzing the transformation in a company and the effectiveness of the received exposure. Depending on the obtained data, the marketing program can always be geared toward achieving maximum effectiveness from the invested funds. This is so that every new project achieves the set goals more quickly, qualitatively, and, most importantly, less expensively.