Marketing agency is becoming increasingly popular in the marketing and advertising industry, as every business needs marketing to compete more effectively, thereby attracting more customers and increasing revenue. However, not every business owner knows what percentage of their budget they should spend on advertising activities, or more precisely, on a marketing agency? Let Markdao Vietnam help you find the answer in this article!
Finding the solution to the marketing agency budget puzzle
Whether you own a billion-dollar company or a newly founded start-up, the power and importance of advertising and marketing are undeniable. How much to spend on marketing is a question that many business owners are deeply concerned about, especially those companies that decide to outsource to a marketing agency to handle their marketing-related matters.
Jessica Horvath, a business consultant at the Business Development Bank of Canada, states that there is no one-size-fits-all answer. Many factors influence the budget a business can allocate to a marketing agency , such as the type of business, market conditions, marketing goals, desired sales, and so on. In this article, we provide a 4-step guide to setting a marketing budget.
Market research - The first step when working with a marketing agency
According to most experts, a business's budget for a marketing agency should be calculated based on its revenue. Typically, B2B companies are advised to allocate 2 to 5% of their revenue to marketing activities. For B2C companies, this ratio is usually higher: between 5 and 10%. This is because B2C companies often need to invest in more marketing channels to reach various customer segments.
Benchmarking against competitors is a must when deciding to hire a marketing agency
The most common and considered best way to accurately determine the budget to spend on a marketing agency is to research what is happening in your industry. Finding out how much your competitors are spending on advertising and marketing is the quickest and most practical way to determine an accurate figure. However, don't forget to consider the size of your company versus your competitors. Compared to small businesses with fewer than 20 employees, medium-sized companies with about 20-50 employees spend twice as much on marketing. Meanwhile, this figure is three times higher for companies with 50 or more employees. The larger the company, the higher the advertising costs will be.
Clearly communicate your desired goals to your marketing agency
Being clear about marketing goals is extremely important for both the business itself and the marketing agency. Having clear goals will help you stay in control of what needs to be done and decide which channels to invest in. From there, you and the agency can determine the most accurate, cost-effective, and efficient marketing strategies.
- How many users do you want to attract through each marketing channel?
- What is the timeline for each campaign?
- What is the purpose of these marketing campaigns?
- Are you looking to increase sales or brand awareness?
- Which customer segments are you targeting?
- What action do you want users to take after seeing your ad?
Consider your own advantages and strengths to help your marketing agency work more effectively
In addition to the costs specifically for advertising activities, the management fees paid to the marketing agency are also a part you must account for. Not every agency charges the same management fees. With large and reputable agencies, the cost to hire them will naturally be higher than smaller ones, but in return, the success rate of your advertising campaigns is more assured. However, you don't always need to work with large agencies. If you only need marketing for a small niche, such as just website SEO, consider agencies that specialize in that area. The agency's specialization will benefit your business by saving costs while ensuring work quality. When you list your goals, desires, and your own strengths and capabilities, you can clearly see your business's current status and proceed to plan and balance the budget for all involved parties.
Consider incidental costs to help your marketing agency work more effectively
Marketing costs, similar to other budget categories, should be broken down into as many small and detailed items as possible. Experts recommend allocating your budget by time period or by marketing channel. Through each phase, you can compare the performance of the marketing agency. So, what are the most popular marketing channels today?
Website and social media – the communication channels most favored by marketing agencies
Websites are currently one of the most popular online marketing channels. Costs associated with website marketing include initial design fees, ongoing management (SEO, product updates, online customer communication, etc.), monthly hosting and domain fees, annual maintenance, and more.
Social media is currently the most dominant field and is targeted by almost every marketing agency in the advertising industry of this 4.0 era. Social media platforms with large user bases like Facebook, LinkedIn, and Instagram are consistently viewed as favorable and high-potential environments for businesses to find and connect with new customers.
Organic or paid traffic – a tough question for marketing agencies?
In contrast to marketing strategies focused on organic traffic, paid advertising is a method that provides businesses with a large volume of traffic in a short amount of time. With paid ads, if you monitor and update them regularly, you can budget more accurately for future plans.
Are traditional advertising formats still used by marketing agencies?
While digital marketing is often more budget-friendly, traditional advertising (via radio, TV, and print media) still holds value and delivers specific results for certain products, services, and the businesses that provide them, especially B2C companies. Therefore, do not hesitate to discuss with the marketing agency you are working with to see if this advertising approach is effective for your business.
Video is a media asset that can be applied to both digital and traditional advertising. Most businesses are advised to use video because it is more effective and visual than posters. However, this type of advertising content is naturally more expensive to produce.
