Making an investment is a fundamental decision for any company, especially for those that are in the process of growth and that want to optimize the marketing of their business. That is why it is important that you consider the elements that we will point out in this article, in which we will address the essential points when creating the marketing budget.

It is necessary to start by emphasizing that it is essential to think about the marketing budget or the one we are going to propose for our strategy. We know that at present, with all the difficulties that the pandemic has meant, it is not easy for SMEs to allocate resources in actions of which they will not see the return on investment in the short term, but without a plan it is easier to fail in the objectives.

In addition, it is very important that you know what the needs of your buyer persona are, what are the possibilities of your company and how far you want to go. Knowing how to choose which team will accompany you on that journey will also be essential to reach the goal.

Planning for the future

Marketing is not an exact science and, like everything in human interactions, it is important to consider a program that shows you a broad plane in which you can experiment and discover your scope, perform preventive or corrective actions, analyze the behaviors and repercussions that these strategies have on people and evaluate them to change or optimize them in any of the scenarios.

A general rule of marketing is to invest 5% of your income to stay the same and 10% to grow.

Why is a marketing budget important?

A Digital Marketing plan is a very elaborate report in which we specify the objectives to be achieved, as well as the strategies and tactics that we will use to achieve them. Therefore, it is very important that this strategy has everything in order and properly planned so as not to improvise and spend more money that goes out of the marketing budget.
However, to plan for the future it is vitally important to recognize what we have achieved so far and what strategies we will define in the future, and thus direct the steps to follow.

It is essential to be willing to change our strategies, our inbound marketing actions, but never, for any reason, lose sight of the objectives.

What does "working with the experts" mean?

Now, it is very difficult that without the right accompaniment, and without a group of experts in the field of marketing and communications, a company will go to the fixed investment of its marketing budget.

Talking about prices is complex, because in a region like Latin America with its diversity of currencies it is very difficult to unify a price table for marketing services. In addition, it is essential to know the purpose and economic possibilities of your SME.

A perhaps more appropriate way to look at it is from percentages of sales. In a developed market such as the United States, it is common for companies to allocate up to 20% of their sales to marketing activities. In markets such as Latin America, the norm revolves around 5% to 10%.
Consequently, we must have the prices of the agencies, and it is simple: the agencies with experience, ability to execute the projects internally and knowledge of the market will be the ones that will have a higher cost than the non-specialized agencies.

Fabrizio Opertti, manager of the IDB's Integration and Trade Sector, explains the importance of SMEs moving forward in the transition from traditional to digital.

"SMEs do not depend on the prices of raw materials, but on knowledge, on innovation. They are more resilient, they were resilient to the onslaught of the last financial crisis in 2008."

What are the items you should review in your marketing budget?

Before studying the prices of a marketing provider, companies should conduct an introspection with the aim of knowing what is the budget they can and want to designate for marketing.

Also, it is essential that companies make an internal analysis prior to conversations with agencies to define what are really the challenges they are facing, what are the goals and objectives of investing in marketing, analyze if it is really necessary to invest there or if they need those resources to, for example, guarantee the basic operation of the business.

If a company determines that without promotion there will be no growth, and that without growth there will be no future, then there marketing is a necessary investment.
It is also important to resist the temptation to demand an immediate return on investment. A serious agency will take the time to adapt to the client and learn as much about the company as possible.

These processes do not necessarily generate an immediate return, but they do ensure that the actions that are implemented are aligned with the interests and needs of the client, beyond implementing generic tasks that may not result.

What percentage of the digital marketing budget is allocated in Latin America?

Strong and experienced agencies usually work under the retainer model, which is about making monthly payments. Why do they do it? Because working for projects implies the same costs for an agency as working with monthly "equals", but with more pressure for the work teams.
This means that, not being a constant client, companies cannot assign a fixed team to the client they are hiring per project, so it is not possible to know the client in depth, putting the results at risk.

There are services that can be hired per project, such as videos, writing an article, graphic design, but even with these services you get
a better result with a fully integrated client agency that knows their needs and that of their clients.

Agencies avoid working on a project basis for two fundamental reasons:

• Avoid the commoditization of services; that is, to turn professional and intellectual services into mass consumption products that end up competing on price rather than quality.
• More services can be integrated into retainer projects at a lower cost thanks to economies of scale.

Advantages and disadvantages of fixed costs and variable costs

Usually, fixed costs are personnel-related, and are costs that do not vary. Example: Once you hire an agency and determine the monthly cost of the services, it does not change, unless you add new components to the contract.

Variable costs change with quantity and are more related to advertising, although the advertising budget can also be a fixed cost.

Something to keep in mind is that a company should not commit 100% of its marketing budget in fixed costs, as contingencies can occur. So, one recommendation is that the company allocate 70% or 80% of its marketing budget to cover fixed expenses and the rest to contingencies.

Another element is to determine if the company has a marketing team or not, and what will be the scope of the project for which the agency is being hired.
When the company has a marketing department, they are in charge of calculating what percentage they will dedicate to fixed costs (whatever they are) and how much will be left for variable costs.

In general, we can say that fixed costs and variable costs vary according to the negotiation that is made with the agency and as always, depending on the needs and capabilities of each SME.

*This content is an adaptation of the article Marketing Budget: Key Points to Assign, which was previously published on the SME Go Digital website.