Allocating Funds For Marketing

David Gass
 


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Importance of Marketing

It has become essential for any business in the competitive atmosphere today to devise a sound marketing strategy. In the absence of an effective marketing plan, survival of any business is very difficult. That is why to successfully run a business; you need to learn the art of allocating funds for marketing wisely so that you can make a balance between the requirements of the marketing department and your income. You need to allocate the funds in such a way that the person responsible for marketing can manage promotional costs, advertising costs, and all other costs that are related to marketing activities smoothly.

Requirements Vary with the Different Companies

Allocating funds for marketing requires that you keep in the mind the cost of the particular media you wish to use, the cost of gathering important relevant information, and also the cost of monitoring any changes in the market trends. You should never underestimate the importance of marketing while allocating funds for marketing. Understand very clearly that if planned properly, the amount of money spent on marketing efforts never goes in vain. Instead, the generation of income increases more than the money spent. However, the percentage of the revenue a company should allocate for marketing may vary according to the position of the company. This percentage may be as high as 25% to 50% in case of startup companies. On the contrary, established companies do not require allocation of this magnitude for marketing. Allocating 5 to 15% of the net revenue is sufficient for these companies.

Different Approaches

There are several different approaches adopted by the different companies for allocating funds for marketing. If you are in an industry where it is easy to foretell the market patterns, then allocating funds as a fixed percentage of revenue is the best method. By adopting this method, you do not indulge in any kind of advertising war that can adversely affect your profitability. However, you need to rethink applying this strategy when your sales start falling. This is the time when you should allocate more funds for marketing instead of allocating fewer funds in ratio to declining sales.

According To Competitors

Another approach you can adopt is that allocating funds for marketing exactly at the level of your competitors. The people who apply this method believe that spending on marketing efforts should be according to the market average. The main drawback of this approach is that you become lazy and start ignoring the importance of marketing efforts.

Task Approach

An alternative to allocating funds for marketing is adopting a “task" approach. This means that you should set your objects according to the task at hand. One more approach that no expert will ever recommend is the residual approach. According to this approach, you allocate only those funds that you can spare after making all other expenses.

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