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Determining Your Marketing Budget

Twin Peak Industries Newsletter
November 5, 2010 Volume 12

Marketing is an important aspect of any inflatables business, but like any business your funds can often be limited. It is important to set a budget for your marketing expenses and allot for various marketing activities throughout the year, or quarter, as your budget allows.

Before you can begin identifying the appropriate marketing mix for your inflatable business you need to determine what your budget will be. Sticking to a budget will make sure you are able to maximize your marketing dollars, while remaining within your company's financial means. There are several methods to determine what your business' marketing budget should be set at.

Percentage of revenues - Using this method requires taking a fixed percentage of your revenues and allocating that set amount for marketing purposes. The most commonly used number for smaller businesses is 20% and 5-10% for larger revenue companies.

Percentage of net sales - With this method your marketing budget is determined as a fraction of your sales. This method differs from percentage of revenue because expenses are excluded in the calculations.

Everything you can afford - As vague as it may sound, if your business is new, fast-growing and aggressive this may be the method for you. Using this method you set aside the money you need to keep your business alive, and to support yourself and your family. The remainder of this goes toward your marketing expenses.

Just a little more than the competition - Try to find out how much your competitors are spending on marketing and spend just a little bit more on your own marketing initiatives. This may be a difficult approach as your competitors' marketing spending information is not readily accessible to you.

Desired customer growth - If you are able to come up with a quantitative number of new customers you are looking for this is a great method to use. You need to determine how much it costs to obtain a customer and multiply this number by how many new customers you are looking to attain. This then becomes you marketing budget.

Desired market share - This method is based on a set goal of attaining a certain percentage of the market. You first need to accurately determine what the market is. Estimate the marketing expenditures of other companies within the industry. Then take a specific percentage of that based on your goal of what you would like to attain of the market.

Objective / task oriented - With this method you need to set out specific objectives, and plan out the tasks required to complete these objectives. Then estimate the cost for all of those tasks.

Remember that whatever budget method you choose, you need to be flexible. There are many internal and external factors affecting this. Your marketing expenditures may change with your company sales, the industry and the economy.

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