Creating the best marketing budget that suits the company’s goals is a nightmare for marketing departments. While Chief Marketing Officers (CMOs) face challenges in justifying the ROI and convincing management, marketing managers face hurdles in allocating the marketing spend across different marketing channels. We have done a thorough market research and have developed 10 steps to build the perfect marketing budget for your company in 2025 that can help you cut down marketing costs.
Mistakes that Marketing Executives Make During Marketing Budget Planning
While the market, customer preferences, and other external factors play crucial roles in marketing budget allocation, there are some major reasons and mistakes marketing executives make when planning their budgets.
According to the annual survey conducted among 395 CMOs across 10 different industry sectors in North America and Northern and Western Europe, 7.7% of company revenue was invested in marketing spending in 2024, down from 9.1% in 2023. PwC, while analyzing the changes in digital advertising trend, forecasted that the advertising spend could potentially grow at a 6.6% CAGR through 2026.
While allocating budget for marketing is good, most companies lack efficient marketing spending, which potentially affects their growth. Some common mistakes companies make while building their marketing budget include
- Lack of effective Data analysis—Most companies have tons of data, but the real challenge is getting rid of inaccurate data.
- Struggles in ROI justification—If the CMO cannot justify the ROI and convince management, budget cuts and pushbacks might occur, eventually impacting revenue.
- Adjusting to the previous year’s budget – Customers and customer preferences change from time to time, and businesses should adopt their marketing strategy and plan accordingly. Tweaking last year’s budget will never increase ROI.
- Rigid Budgeting – Marketing is an unpredictable game and the funds should be liquidated enough among different channels to make certain amendments according to the current market and customer trends.
Apart from the above-mentioned reasons, there are several other reasons why most companies fail to create the best marketing budget. We have come up with a 10-step marketing budget framework that can help marketing executives and their teams craft the best marketing budget in 2025.
10 Steps to Build A Perfect Marketing Budget
- Set Clear Marketing Objectives
Before setting your marketing budget, you should understand and set a marketing plan that aligns with the company’s marketing goals, be it increasing brand awareness or boosting customer retention, etc.
The marketing manager should communicate with program/ campaign managers and make sure each objective is SMART (Specific, Measurable, Achievable, Relevant, and Time-bound) and should be connected with a specific KPI.
Once the objectives are defined, the marketing manager must convert the estimated marketing investment to a business outcome. For example, if the objective or marketing goal is to create brand awareness, marketing should determine the budget for the location, target audience, and marketing channels.
- Analyze Past Performance and ROI
As a marketing manager, you should analyze the past performance among the marketing channels and find out the reason behind its working – it may be due to the trend, change in consumer behavior, or expansion into a new market. Make sure that you never decide on allocating the budget for the marketing channels based on your previous marketing campaigns or performance metrics.
After analyzing the past performance, compare it with your marketing plan (step 1), and proceed further in crafting your marketing strategy and budget accordingly.
- Focus on Data-Driven Decision Making
An effective marketing budget demands effective data-driven decision-making. Without airtight and accurate data, companies may find it difficult to allocate funds among marketing channels. Despite adopting Google Analytics 4 for measuring data and making budget decisions, CMOs and marketing managers may face difficulty in making data-driven decisions because of time inefficiencies. To avoid these issues and make speedy and accurate decisions, marketers should seek the assistance of an AI marketing assistant.
AI marketing assistant tools like Backona AI will help you extract live data, visualize data, and assist you in your marketing strategy, planning, and control. Be it insights on successful campaigns or identifying the demographics or target audience, Backona AI can help you in this step.
- Look Out for Economic Uncertainties
As a marketing manager, before helping the CMO craft the marketing budget, you should freeze your marketing planning, strategy, and control. By establishing your SWOT and PESTLE analysis, you will be able to define your marketing strategies based on the micro and macro environmental factors including inflation, environmental concerns, and legal factors which can potentially affect your marketing strategy.
For example, inflation can impact your advertising budget because of new environmental regulations that might affect product packaging and messaging.
- Monitor Competitors & Craft a Winning Strategy
You have analyzed the market demand, your previous performance, and data-driven insights, and created your marketing plan. Now it is time to watch over your competitors and how they are responding to the current marketing trend. It is crucial to analyze their pricing strategy, ad spends, and marketing strategy, and craft a marketing strategy-based budget that can help you outperform the competition.
- Rationalise Your Marketing Budget Among Different Channels
In most companies, CMOs and Marketing Managers allocate the budget after analyzing the marketing objectives, KPIs, and marketing goals. Diversifying across Paid, Earned, and Owned media is wise, but prioritizing the right platform is crucial.
Backona AI can help you prioritize the investment by tracking and analyzing past marketing performance of various marketing channels leading to a strategic, predictive, and perfect marketing budget for your company in 2025.
- Streamline your Marketing with Automation
CMOs and marketing managers should consider allocating some funds for automation-based tools. This need not be a huge investment, but some tools require very low investment and can transform your efficiency in marketing tasks like ad bidding, automated email marketing, and SMS to segmented audiences, and other CRM processes.
This can help the marketing team focus more on strategy and implementation rather than follow-ups and customer relationships.
- Make your Marketing Budget Flexible
It does not mean that you should change your marketing budget often. However, it is the marketing strategy that your marketing team should adopt based on the market trends, customer preferences, and emerging crises.
It is better if you allocate some contingency funds to meet those unforeseen changes or marketing strategies to capitalize on high-performing opportunities.
- Collaborate with the Finance and Sales Teams
After creating the first draft of the marketing budget by implementing the first eight steps, CMO will have to align the marketing spend with the financial forecast and revenue goals by coordinating with finance and the sales team.
This step is crucial as it can help the CMO justify the data with effective business outcomes, thereby convincing the management towards long-term marketing investment plans.
- Establish an Agile Budgeting Approach
Instead of creating a static marketing budget, it is effective to establish an agile budgeting approach which can potentially maximize the return on investment. This can be done by conducting quarterly budget reviews and amendments, thereby following an agile approach while crafting the marketing budget.
Conclusion
Following these 10 steps, you can craft your perfect marketing budget for your company. Data plays a crucial role in managing the marketing strategy, planning, and budget, and hence it is essential to consider AI marketing assistant to assist in your decision-making process.
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