Suppose you’re trying to convince your friend to watch your favorite movie. You could either tell them about the intriguing plot or show them the exciting trailer.

To find out which approach works best, you try both methods with different friends and see which one gets more people to watch the movie.

Marketing experiments work in much the same way, allowing businesses to test different marketing strategies, gather feedback from their target audience, and make data-driven decisions that lead to improved outcomes and growth.

By testing different approaches and measuring their outcomes, companies can identify what works best for their unique target audience and adapt their marketing strategies accordingly. This leads to more efficient use of marketing resources and results in higher conversion rates, increased customer satisfaction, and, ultimately, business growth.

Marketing experiments are the backbone of building an organization’s culture of learning and curiosity, encouraging employees to think outside the box and challenge the status quo.

In this article, we will delve into the fundamentals of marketing experiments, discussing their key elements and various types. By the end, you’ll be in a position to start running these tests and securing better marketing campaigns with explosive results.

Why Digital Marketing Experiments Matter

One of the most effective ways to drive growth and optimize marketing strategies is through digital marketing experiments. These experiments provide invaluable insights into customer preferences, behaviors, and the overall effectiveness of marketing efforts, making them an essential component of any digital marketing strategy.

Digital marketing experiments matter for several reasons:

• Customer-centric approach: By conducting experiments, businesses can gain a deeper understanding of their target audience’s preferences and behaviors. This enables them to tailor their marketing efforts to better align with customer needs, resulting in more effective and engaging campaigns.
• Data-driven decision-making: Marketing experiments provide quantitative data on the performance of different marketing strategies and tactics. This empowers businesses to make informed decisions based on actual results rather than relying on intuition or guesswork. Ultimately, this data-driven approach leads to more efficient allocation of resources and improved marketing outcomes.
• Agility and adaptability: Businesses must be agile and adaptable to keep up with emerging trends and technologies. Digital marketing experiments allow businesses to test new ideas, platforms, and strategies in a controlled environment, helping them stay ahead of the curve and quickly respond to changing market conditions.
• Continuous improvement: Digital marketing experiments facilitate an iterative process of testing, learning, and refining marketing strategies. This ongoing cycle of improvement enables businesses to optimize their marketing efforts, drive better results, and maintain a competitive edge in the digital marketplace.
• ROI and profitability: By identifying which marketing tactics are most effective, businesses can allocate their marketing budget more efficiently and maximize their return on investment. This increased profitability can be reinvested into the business, fueling further growth and success.

Developing a culture of experimentation allows businesses to continuously improve their marketing strategies, maximize their ROI, and avoid being left behind by the competition.

The Fundamentals of Digital Marketing Experiments

Marketing experiments are structured tests that compare different marketing strategies, tactics, or assets to determine which one performs better in achieving specific objectives.

These experiments use a scientific approach, which involves formulating hypotheses, controlling variables, gathering data, and analyzing the results to make informed decisions.

Marketing experiments provide valuable insights into customer preferences and behaviors, enabling businesses to optimize their marketing efforts and maximize returns on investment (ROI).

There are several types of marketing experiments that businesses can use, depending on their objectives and available resources.

The most common types include:

A/B testing

A/B testing, also known as split testing, is a simple yet powerful technique that compares two variations of a single variable to determine which one performs better.

In an A/B test, the target audience is randomly divided into two groups: one group is exposed to version A (the control). In contrast, the other group is exposed to version B (the treatment). The performance of both versions is then measured and compared to identify the one that yields better results.

A/B testing can be applied to various marketing elements, such as headlines, calls-to-action, email subject lines, landing page designs, and ad copy. The primary advantage of A/B testing is its simplicity, making it easy for businesses to implement and analyze.

Multivariate testing

Multivariate testing is a more advanced technique that allows businesses to test multiple variables simultaneously.

In a multivariate test, several elements of a marketing asset are modified and combined to create different versions. These versions are then shown to different segments of the target audience, and their performance is measured and compared to determine the most effective combination of variables.

Multivariate testing is beneficial when optimizing complex marketing assets, such as websites or email templates, with multiple elements that may interact with one another. However, this method requires a larger sample size and more advanced analytical tools compared to A/B testing.

Pre-post analysis

Pre-post analysis involves comparing the performance of a marketing strategy before and after implementing a change.

This type of experiment is often used when it is not feasible to conduct an A/B or multivariate test, such as when the change affects the entire customer base or when there are external factors that cannot be controlled.

While pre-post analysis can provide useful insights, it is less reliable than A/B or multivariate testing because it does not account for potential confounding factors. To obtain accurate results from a pre-post analysis, businesses must carefully control for external influences and ensure that the observed changes are indeed due to the implemented modifications.

How To Start Growth Marketing Experiments

To conduct effective marketing experiments, businesses must pay attention to the following key elements:

Clear objectives

Having clear objectives is crucial for a successful marketing experiment. Before starting an experiment, businesses must identify the specific goals they want to achieve, such as increasing conversions, boosting engagement, or improving click-through rates. Clear objectives help guide the experimental design and ensure the results are relevant and actionable.

Hypothesis-driven approach

A marketing experiment should be based on a well-formulated hypothesis that predicts the expected outcome. A reasonable hypothesis is specific, testable, and grounded in existing knowledge or data. It serves as the foundation for experimental design and helps businesses focus on the most relevant variables and outcomes.

Proper experimental design

A marketing experiment requires a well-designed test that controls for potential confounding factors and ensures the reliability and validity of the results. This includes the random assignment of participants, controlling for external influences, and selecting appropriate variables to test. Proper experimental design increases the likelihood that observed differences are due to the tested variables and not other factors.

Adequate sample size

A successful marketing experiment requires an adequate sample size to ensure the results are statistically significant and generalizable to the broader target audience. The required sample size depends on the type of experiment, the expected effect size, and the desired level of confidence. In general, larger sample sizes provide more reliable and accurate results but may also require more resources to conduct the experiment.

Data-driven analysis

Marketing experiments rely on a data-driven analysis of the results. This involves using statistical techniques to determine whether the observed differences between the tested variations are significant and meaningful. Data-driven analysis helps businesses make informed decisions based on empirical evidence rather than intuition or gut feelings.

By understanding the fundamentals of marketing experiments and following best practices, businesses can gain valuable insights into customer preferences and behaviors, ultimately leading to improved outcomes and growth.

Setting up Your First Marketing Experiment

Embarking on your first marketing experiment can be both exciting and challenging. Following a systematic approach, you can set yourself up for success and gain valuable insights to improve your marketing efforts.

Here’s a step-by-step guide to help you set up your first marketing experiment.

Identifying your marketing objectives

Before diving into your experiment, it’s essential to establish clear marketing objectives. These objectives will guide your entire experiment, from hypothesis formulation to data analysis.

Consider what you want to achieve with your marketing efforts, such as increasing website conversions, improving open email rates, or boosting social media engagement.

Make sure your objectives are specific, measurable, achievable, relevant, and time-bound (SMART) to ensure that they are actionable and provide meaningful insights.

Formulating a hypothesis

With your marketing objectives in mind, the next step is formulating a hypothesis for your experiment. A hypothesis is a testable prediction that outlines the expected outcome of your experiment. It should be based on existing knowledge, data, or observations and provide a clear direction for your experimental design.

For example, suppose your objective is to increase email open rates. In that case, your hypothesis might be, “Adding the recipient’s first name to the email subject line will increase the open rate by 10%.” This hypothesis is specific, testable, and clearly linked to your marketing objective.

Designing the experiment

Once you have a hypothesis in place, you can move on to designing your experiment. This involves several key decisions:

Choosing the right testing method:

Select the most appropriate testing method for your experiment based on your objectives, hypothesis, and available resources.

As discussed earlier, common testing methods include A/B, multivariate, and pre-post analyses. Choose the method that best aligns with your goals and allows you to effectively test your hypothesis.

Selecting the variables to test:

Identify the specific variables you will test in your experiment. These should be directly related to your hypothesis and marketing objectives. In the email open rate example, the variable to test would be the subject line, specifically the presence or absence of the recipient’s first name.

When selecting variables, consider their potential impact on your marketing objectives and prioritize those with the greatest potential for improvement. Also, ensure that the variables are easily measurable and can be manipulated in your experiment.

Identifying the target audience:

Determine the target audience for your experiment, considering factors such as demographics, interests, and behaviors. Your target audience should be representative of the larger population you aim to reach with your marketing efforts.

When segmenting your audience for the experiment, ensure that the groups are as similar as possible to minimize potential confounding factors.

In A/B or multivariate testing, this can be achieved through random assignment, which helps control for external influences and ensures a fair comparison between the tested variations.

Executing the experiment

With your experiment designed, it’s time to put it into action.

This involves several key considerations:

Timing and duration:

Choose the right timing and duration for your experiment based on factors such as the marketing channel, target audience, and the nature of the tested variables.

The duration of the experiment should be long enough to gather a sufficient amount of data for meaningful analysis but not so long that it negatively affects your marketing efforts or causes fatigue among your target audience.

In general, aim for a duration that allows you to reach a predetermined sample size or achieve statistical significance. This may vary depending on the specific experiment and the desired level of confidence.

Monitoring the experiment:

During the experiment, monitor its progress and performance regularly to ensure that everything is running smoothly and according to plan. This includes checking for technical issues, tracking key metrics, and watching for any unexpected patterns or trends.

If any issues arise during the experiment, address them promptly to prevent potential biases or inaccuracies in the results. Additionally, avoid making changes to the experimental design or variables during the experiment, as this can compromise the integrity of the results.

Analyzing the results

Once your experiment has concluded, it’s time to analyze the data and draw conclusions.

This involves two key aspects:

Statistical significance:

Statistical significance is a measure of the likelihood that the observed differences between the tested variations are due to the variables being tested rather than random chance. To determine statistical significance, you will need to perform a statistical test, such as a t-test or chi-squared test, depending on the nature of your data.

Generally, a result is considered statistically significant if the probability of the observed difference occurring by chance (the p-value) is less than a predetermined threshold, often set at 0.05 or 5%. This means there is a 95% confidence level that the observed difference is due to the tested variables and not random chance.

Practical significance:

While statistical significance is crucial, it’s also essential to consider the practical significance of your results. This refers to the real-world impact of the observed differences on your marketing objectives and business goals.

To assess practical significance, consider the effect size of the observed difference (e.g., the percentage increase in email open rates) and the potential return on investment (ROI) of implementing the winning variation. This will help you determine whether the experiment results are worth acting upon and inform your marketing decisions moving forward.

A systematic approach to designing growth marketing experiments helps you to design, execute, and analyze your experiment effectively, ultimately leading to better marketing outcomes and business growth.

Examples of Successful Marketing Experiments

In this section, we will explore three fictional case studies of successful marketing experiments that led to improved marketing outcomes. These examples will demonstrate the practical application of marketing experiments across different channels and provide valuable lessons that can be applied to your own marketing efforts.

Example 1: Redesigning a website for increased conversions

AcmeWidgets, an online store selling innovative widgets, noticed that its website conversion rate had plateaued.

They conducted a marketing experiment to test whether a redesigned landing page could improve conversions. They hypothesized that a more visually appealing and user-friendly design would increase conversion rates by 15%.

AcmeWidgets used A/B testing to compare their existing landing page (the control) with a new, redesigned version (the treatment). They randomly assigned website visitors to one of the two landing pages. They tracked conversions over a period of four weeks.

At the end of the experiment, AcmeWidgets found that the redesigned landing page had a conversion rate 18% higher than the control. The results were statistically significant, and the company decided to implement the new design across its entire website.

As a result, AcmeWidgets experienced a substantial increase in sales and revenue.

Example 2: Optimizing email marketing campaigns

EcoTravel, a sustainable travel agency, wanted to improve the open rates of their monthly newsletter. They hypothesized that adding a sense of urgency to the subject line would increase open rates by 10%.

To test this hypothesis, EcoTravel used A/B testing to compare two different subject lines for their newsletter:

• “Discover the world’s most beautiful eco-friendly destinations” (control)
• “Last chance to book: Explore the world’s most beautiful eco-friendly destinations” (treatment)

EcoTravel sent the newsletter to a random sample of their subscribers. Half received the control subject line, and the other half received the treatment. They then tracked the open rates for both groups over one week.

The results of the experiment showed that the treatment subject line, which included a sense of urgency, led to a 12% increase in open rates compared to the control.

Based on these findings, EcoTravel incorporated a sense of urgency in their future email subject lines to boost newsletter engagement.

Example 3: Improving social media ad performance

FitFuel, a meal delivery service for fitness enthusiasts, was looking to improve its Facebook ad campaign’s click-through rate (CTR). They hypothesized that using an image of a satisfied customer enjoying a FitFuel meal would increase CTR by 8% compared to their current ad featuring a meal image alone.

FitFuel conducted an A/B test on their Facebook ad campaign, comparing the performance of the control ad (meal image only) with the treatment ad (customer enjoying a meal). They targeted a similar audience with both ad variations and measured the CTR over two weeks.
The experiment revealed that the treatment ad, featuring the customer enjoying a meal, led to a 10% increase in CTR compared to the control ad. FitFuel decided to update its

Facebook ad campaign with the new image, resulting in a more cost-effective campaign and higher return on investment.

Lessons learned from these examples

These fictional examples of successful marketing experiments highlight several key takeaways:

• Clearly defined objectives and hypotheses: In each example, the companies had specific marketing objectives and well-formulated hypotheses, which helped guide their experiments and ensure relevant and actionable results.
• Proper experimental design: Each company used the appropriate testing method for their experiment and carefully controlled variables, ensuring accurate and reliable results.
• Data-driven decision-making: The companies analyzed the data from their experiments to make informed decisions about implementing changes to their marketing strategies, ultimately leading to improved outcomes.
• Continuous improvement: These examples demonstrate that marketing experiments can improve marketing efforts continuously. By regularly conducting experiments and applying the lessons learned, businesses can optimize their marketing strategies and stay ahead of the competition.
• Relevance across channels: Marketing experiments can be applied across various marketing channels, such as website design, email campaigns, and social media advertising. Regardless of the channel, the principles of marketing experimentation remain the same, making them a valuable tool for marketers in diverse industries.

By learning from these fictional examples and applying the principles of marketing experimentation to your own marketing efforts, you can unlock valuable insights, optimize your marketing strategies, and achieve better results for your business.

Common Pitfalls of Marketing Experiments and How to Avoid Them

Conducting marketing experiments can be a powerful way to optimize your marketing strategies and drive better results.

However, it’s important to be aware of common pitfalls that can undermine the effectiveness of your experiments. In this section, we will discuss some of these pitfalls and provide tips on how to avoid them.

Insufficient sample size

An insufficient sample size can lead to unreliable results and limit the generalizability of your findings. When your sample size is too small, you run the risk of not detecting meaningful differences between the tested variations or incorrectly attributing the observed differences to random chance.

To avoid this pitfall, calculate the required sample size for your experiment based on factors such as the expected effect size, the desired level of confidence, and the type of statistical test you will use.

In general, larger sample sizes provide more reliable and accurate results but may require more resources to conduct the experiment. Consider adjusting your experimental design or testing methods to accommodate a larger sample size if necessary.

Lack of clear objectives

Your marketing experiment may not provide meaningful or actionable insights without clear objectives. Unclear objectives can lead to poorly designed experiments, irrelevant variables, or difficulty interpreting the results.

To prevent this issue, establish specific, measurable, achievable, relevant, and time-bound (SMART) objectives before starting your experiment. These objectives should guide your entire experiment, from hypothesis formulation to data analysis, and ensure that your findings are relevant and useful for your marketing efforts.

Confirmation bias

Confirmation bias occurs when you interpret the results of your experiment in a way that supports your pre-existing beliefs or expectations. This can lead to inaccurate conclusions and suboptimal marketing decisions.

To minimize confirmation bias, approach your experiments with an open mind and be willing to accept results that challenge your assumptions.

Additionally, involve multiple team members in the data analysis process to ensure diverse perspectives and reduce the risk of individual biases influencing the interpretation of the results.

Overlooking external factors

External factors, such as changes in market conditions, seasonal fluctuations, or competitor actions, can influence the results of your marketing experiment and potentially confound your findings. Ignoring these factors may lead to inaccurate conclusions about the effectiveness of your marketing strategies.

To account for external factors, carefully control for potential confounding variables during the experimental design process. This might involve using random assignment, testing during stable periods, or controlling for known external influences.

Consider running follow-up experiments or analyzing historical data to confirm your findings and rule out the impact of external factors.

Tips for avoiding these pitfalls

By being aware of these common pitfalls and following best practices, you can ensure the success of your marketing experiments and obtain valuable insights for your marketing efforts. Here are some tips to help you avoid these pitfalls:

• Plan your experiment carefully: Invest time in the planning stage to establish clear objectives, calculate an adequate sample size, and design a robust experiment that controls for potential confounding factors.
• Use a hypothesis-driven approach: Formulate a specific, testable hypothesis based on existing knowledge or data to guide your experiment and focus on the most relevant variables and outcomes.
• Monitor your experiment closely: Regularly check the progress of your experiment, address any issues that arise, and ensure that your experiment is running smoothly and according to plan.
• Analyze your data objectively: Use statistical techniques to determine the significance of your results and consider the practical implications of your findings before making marketing decisions.
• Learn from your experiments: Apply the lessons learned from your experiments to continuously improve your marketing strategies and stay ahead of the competition.

By avoiding these common pitfalls and following best practices, you can increase the effectiveness of your marketing experiments, gain valuable insights into customer preferences and behaviors, and ultimately drive better results for your business.

Building a Culture of Experimentation

To truly reap the benefits of marketing experiments, it’s essential to build a culture of experimentation within your organization. This means fostering an environment where curiosity, learning, data-driven decision-making, and collaboration are valued and encouraged.

Encouraging curiosity and learning within your organization

Cultivating curiosity and learning starts with leadership. Encourage your team to ask questions, explore new ideas, and embrace a growth mindset.

Promote ongoing learning by providing resources, such as training programs, workshops, or access to industry events, that help your team stay up-to-date with the latest marketing trends and techniques.

Create a safe environment where employees feel comfortable sharing their ideas and taking calculated risks. Emphasize the importance of learning from both successes and failures and treat every experiment as an opportunity to grow and improve.

Adopting a data-driven mindset

A data-driven mindset is crucial for successful marketing experimentation. Encourage your team to make decisions based on data rather than relying on intuition or guesswork. This means analyzing the results of your experiments objectively, using statistical techniques to determine the significance of your findings, and considering the practical implications of your results before making marketing decisions.

To foster a data-driven culture, invest in the necessary tools and technologies to collect, analyze, and visualize data effectively. Train your team on how to use these tools and interpret the data to make informed marketing decisions.

Regularly review your data-driven efforts and adjust your strategies as needed to continuously improve and optimize your marketing efforts.

Integrating experimentation into your marketing strategy

Establish a systematic approach to conducting marketing experiments to fully integrate experimentation into your marketing strategy. This might involve setting up a dedicated team or working group responsible for planning, executing, and analyzing experiments or incorporating experimentation as a standard part of your marketing processes.

Create a roadmap for your marketing experiments that outlines each project’s objectives, hypotheses, and experimental designs. Monitor the progress of your experiments and adjust your roadmap as needed based on the results and lessons learned.

Ensure that your marketing team has the necessary resources, such as time, budget, and tools, to conduct experiments effectively. Set clear expectations for the role of experimentation in your marketing efforts and emphasize its importance in driving better results and continuous improvement.

Collaborating across teams for a holistic approach

Marketing experiments often involve multiple teams within an organization, such as design, product, sales, and customer support. Encourage cross-functional collaboration to ensure a holistic approach to experimentation and leverage each team’s unique insights and expertise.

Establish clear communication channels and processes for sharing information and results from your experiments. This might involve regular meetings, shared documentation, or internal presentations to keep all stakeholders informed and engaged.

Collaboration also extends beyond your organization. Connect with other marketing professionals, industry experts, and thought leaders to learn from their experiences, share your own insights, and stay informed about the latest trends and best practices in marketing experimentation.

By building a culture of experimentation within your organization, you can unlock valuable insights, optimize your marketing strategies, and drive better results for your business.

Encourage curiosity and learning, adopt a data-driven mindset, integrate experimentation into your marketing strategy, and collaborate across teams to create a strong foundation for marketing success.

In the world of marketing, your budget is the fuel that powers your business efforts, allowing you to reach new audiences and accomplish your goals. If your marketing budget is well-planned and executed, it gives you the resources to tackle any challenge thrown your way.

But before you start allocating funds, it’s essential to answer two crucial questions: What are you going to spend money on, and why?

Even if these questions sound simple, they make the difference between a thriving marketing campaign and a failed one.

In this article, we’ll explain what a marketing budget is, share average marketing budgets for startups and small businesses, and provide marketing budget examples to demonstrate how to calculate it easily. Plus, you’ll get useful tips for your marketing budget allocation.

Ready? Let’s explore all the essential aspects of your marketing budget management.

What is a marketing budget?

A marketing budget refers to the amount of money you aside to cover all your marketing expenses. This includes expenses related to advertising, promotion, public relations, market research, branding, and other marketing activities.

The marketing budget is an important tool to design and execute effective marketing campaigns and achieve your marketing objectives. What’s more, it allows you to keep your marketing efforts aligned with the overall business strategy.

How to calculate your marketing budget? 5 easy steps to marketing budget management.

Marketing budget management involves the process of planning, tracking, and optimizing expenses. Obviously, this ensures that you use the allocated budget effectively and efficiently to achieve your marketing goals.

The latest findings from the CMO Survey’s 29th edition reveal that in 2022, companies allocated a record-breaking 13.8% of their total budget to marketing. While this figure can serve as a useful benchmark for a marketing budget example, calculating the marketing budget can vary depending on the size of your business, the industry, the target market, and the marketing goals. Regardless of the factors involved, here are five essential steps how to calculate your marketing budget:

Step 1: Determine your overall revenue goal.

Looking for ways to avoid overspending or underspending? Well, before you can calculate your marketing budget, you should get clear about the overall revenue goal.

To clarify, your revenue goal represents the amount of money you expect to earn during a specific period. It helps you understand the amount of revenue you need to generate to cover expenses and make a profit.

By setting a revenue goal, you can then determine how much to spend on marketing. And this immediately calls for considering factors such as the cost of acquiring new customers, retaining existing ones, and promoting your brand.

Let’s get specific. Suppose your marketing team aims to acquire 300 new customers within a set timeframe. In this case, the essential question is: “What is the required budget to acquire 300 new customers?”

To determine this, you must first identify the cost of acquiring one new customer. This figure is calculated using two essential metrics: cost per lead and conversion rate. By examining these data points, you can identify the precise amount to invest in your marketing efforts.

Which leads us to step number two.

Step 2: Calculate the cost per lead.

The cost per lead (CPL) is a straightforward and effective metric that indicates the marketing budget required to generate a new lead. CPL is an important number on your marketing budget calculator as it can provide valuable insights into the effectiveness of your efforts.

To determine your CPL, simply divide your total marketing expenses by the number of leads you have obtained.

Total marketing budget ÷ Number of new leads = Cost per lead

For instance, let’s say you spend $1,000 on social media marketing, $1,500 on email marketing, and $5,000 on promotional brand events to acquire new leads. This means your total spend for marketing equals $7,500 ($1,000 + $1,500 + $5,000). Suppose you acquired 100 leads after spending this budget. Thus, your cost per lead is $75 (7,500 ÷ 100 = 75).

This formula is also helpful to calculate the CPL for each of your marketing channels. Eventually, it enables you to make informed decisions on how to distribute your marketing budget across channels, depending on which ones yield the most cost-effective leads.

To put it in context, suppose you run an e-commerce business and want to measure the effectiveness of your email marketing campaign. You spend $2,000 on email marketing in a month and generate 20 leads as a result. To calculate your CPL, divide your marketing spend by the number of leads ($2,000÷20), which gives you a cost per lead of $100.

By monitoring your CPL over time, you can determine whether your email marketing campaign is becoming more or less cost-effective. And as a result, adjust your strategy accordingly. For instance, if you find that your CPL is steadily increasing, you may need to refine your targeting or messaging to boost the performance of your campaign. Alternatively, if your CPL is decreasing, you may want to allocate more resources and capitalize on the campaign’s cost-effectiveness.

Step 3: Calculate your conversion rate.

Simply generating leads isn’t enough. Your ultimate target is to convert them into paying customers to achieve your business goals.

Calculate your conversion rate by dividing the number of sales by the number of leads you have generated.

Total number of conversions ÷ Total number of leads X 100% = Conversion rate

For instance, if you generated 500 leads and converted 10 into customers, your average conversion rate is 5% (10 customers/500 leads X 100% = 5%).

If you don’t calculate the average conversion rate for your company, setting up your marketing budget may prove challenging. Why? Because without such data, you may be wasting resources on ineffective marketing strategies.

After determining your cost per lead and conversion rate, you can finalize calculating your marketing budget.

Step 4: Determine how many leads you need.

To reach your new customer goal, you need to determine the number of leads your company requires. You can know this number by dividing your new customer goal by your average conversion rate. This approach provides a clear picture of how many leads your company needs to reach its new customer goal. Here’s the formula:

The number of your new customer goal ÷ The average conversion rate = The number of leads you will need.

So, 30 new customers ÷ 2% x 100 = 1500 leads

This means that if your average conversion rate is 2%, you’ll need to generate at least 1500 new leads in order to hit your target of 30 new customers.

Step 5: Monitor and track expenses.

Regularly track and analyze your marketing spend to ensure that you’re staying within budget and maximizing ROI. Monitor your campaigns’ performance and make necessary adjustments to your budget allocation to optimize results. Without a doubt, you should allocate more funds towards high-performing channels and decrease spending on low-performing channels.

Budget considerations for startups and small businesses: 10 essential items to go into your list.

Now that you’ve learnt how to calculate a marketing budget, we can look into the marketing budget categories.

So, what’s in a marketer’s budget?

A variety of expenses should go into your marketing budget breakdown to reflect the unique needs and goals of your business:

1. Branding and design: Creating a logo, designing marketing materials, and developing a brand identity.
2. Website development: Building a website, hosting fees, and ongoing maintenance and updates.
3. Content creation: Creating blog posts, social media content, and other marketing materials.
4. Advertising: Paid social media ads, Google AdWords, and other forms of online advertising.
5. Public relations: Establishing connections with journalists and media outlets and producing press releases and other materials for the media.
6. Events: Attending trade shows, hosting events, and other forms of in-person marketing.
7. Marketing technology: Leveraging marketing technology such as automation tools, customer relationship management (CRM) software, email marketing software, and project management tools to achieve marketing goals.
8. Employee salaries, benefits, and training: Paying your marketing team, if you have one, and providing benefits such as health insurance and retirement plans. Plus, investing in the team’s continuous development and growth.
9. Research and analysis: Conducting market research, analyzing customer data, and tracking the health of your marketing campaigns.
10. Unexpected costs: For example, a sudden change in market conditions or a new competitor entering the market may require a shift in marketing strategy. You may even need additional marketing spending to stay competitive. That’s why it’s important to have some flexibility in the budget to accommodate these unexpected costs and changes. One way to plan for unexpected costs is to set aside a contingency fund within the marketing budget. This fund can be used to cover unforeseen expenses or to invest in new marketing opportunities that may arise.

Marketing budget allocation best practices

Next, we’ve handpicked marketing budget allocation tips and strategies to help you navigate this challenging process more easily. Follow these tips to enhance the impact of your marketing budget and achieve your business goals more efficiently.

Prioritize your channels.

Who is your target audience? What are your business objectives? Answer these questions to be able to prioritize your marketing channels. Focus on the channels that offer the best potential to reach your target audience and drive the desired results.

Consider your customer journey.

Wondering how to allocate your marketing budget effectively? Consider the various stages a potential customer goes through before making a purchase, including awareness, consideration, decision, and post-purchase evaluation. For example, you may allocate more funds towards acquisition tactics at the top of the funnel. Alternatively, if you want to build loyalty, you may concentrate on retention tactics at the bottom of the funnel.

Plan for contingencies.

Allocate a portion of your budget towards unforeseen circumstances and unexpected expenses. This is your lifeboat to ensure that you have the resources to pivot your marketing strategy if needed.

Use technology to simplify budget management.

Technology isn’t going anywhere. It’s becoming more and more integrated in our daily lives, marketing budgets are following suit, with more and more resources being channeled towards digital efforts.

Investing in marketing technology, such as a marketing automation tool, can be a game-changer. It can help you determine attribution, cost per lead, and conversion rates, as well as generate and nurture leads. By the way, you can also utilize marketing budget management software to automate tracking, enhance analysis and improve overall efficiency. What’s more, a versatile project management tool such as Teamly can help to improve team communication and streamline work processes.

Make digital advertising your first choice.

Note that traditional advertising, such as TV and radio ads and billboards, can be more expensive than digital advertising. Therefore, they may not be effective for startups and small businesses trying to reach a more targeted audience.

Be flexible.

Remember, the marketing budget is not a fixed number. It can be adjusted depending on the performance of your marketing efforts and the needs of your business. Be prepared to adjust your budget allocation based on changing business conditions, emerging trends, and other factors.

Startups vs. small businesses: Is the marketing budget different for them?

Marketing budget allocation for small businesses and startups can differ in several ways, primarily due to differences in resources, goals, and target markets.

Small businesses may have more established customer bases and a clearer understanding of their target markets. Therefore, a small business marketing budget may focus on retaining customers and building loyalty through customer engagement, referrals, and personalized marketing efforts.

In contrast, startups may have limited resources and may be looking to establish themselves in a new market. So, a startup marketing budget allocation may be geared towards acquiring new customers through awareness-building and lead-generation tactics.

An average marketing budget for small businesses.

Small businesses typically allocate around 7-8% of their total revenue to marketing efforts.

An average marketing budget for startups.

Startups should allocate 10-11% of their overall revenue towards marketing efforts.

Here’s a startup marketing budget example. If a startup has an annual revenue of $500,000, its marketing budget would typically range between $50,000 to $55,000 to be able to establish brand awareness and attract customers.

Pro tip: Consider the industry in which your business operates

One factor that can greatly impact your marketing budget is the industry in which your business operates. B2B companies are advised to allocate a marketing budget between 2% and 5% of their revenue. However, for B2C companies, the recommended proportion is typically higher, ranging from 5% to 10%. This is because B2C businesses often require a larger investment in marketing channels, such as social media, influencer marketing, and other forms of advertising, in order to effectively target various customer segments.

A marketing budget example for small businesses and startups

Here’s an example of a marketing budget breakdown:

Total marketing budget: $50,000

1. Inbound content marketing: $12,500 (25% of the total marketing budget)
   • Includes blog content creation, social media management, and SEO
2. Paid advertising: $15,000 (30% of total budget)
   • Includes Google Ads and social media advertising
3. Email marketing: $5,000 (10% of total budget)
   • Includes email newsletter creation and distribution
4. Events and sponsorships: $7,500 (15% of total budget)
   • Includes trade shows, conferences, and community events
5. Traditional advertising: $5,000 (10% of total budget)
   • Includes print ads and local radio spots
6. Contingency fund: $5,000 (10% of total budget)
   • Set aside for unexpected costs or opportunities that may arise throughout the year.

Of course, the specific allocation of a marketing budget will vary depending on the business’s goals, target audience, and industry. This is just a single example to give you an idea of how a small business might divide up its marketing budget.

Marketing budget allocation: Why one size doesn’t fit all

Start looking into the topic of allocating a marketing budget, and you’ll see that examples are ample. In fact, businesses take a wide variety of approaches.

Some companies, like Casper, invest heavily in marketing and sales, allocating as much as 43% of their revenue to these efforts. Others, like Kohl’s, take a more conservative approach, spending only 4.9% of their revenue on marketing. Under Armour, falls somewhere in the middle, dedicating 10.5% of its revenue to marketing.

But what does it all mean? Your choices will vary widely depending on the company and the industry you operate in.

Direct-to-consumer brands, for example, often require a larger investment in marketing to build brand awareness and reach new customers. However, even within this category, there is significant diversity in marketing spend. While Casper spends a high proportion of its revenue on marketing, numbers are different for other e-commerce companies. Stitch Fix, for example, allocates only 3% of its revenue to marketing.

This illustrates that there is no one-size-fits-all approach to allocating marketing budgets. Instead, companies must carefully consider their specific industry, business goals, and target audience when determining their marketing budgets.

One factor that contributes to the diversity of marketing budget examples is the increasing importance of digital marketing channels. Look around. With the rise of social media and other digital platforms, businesses have more options than ever before for reaching their target audience. However, this also means that companies must be strategic in their approach to digital marketing. They should carefully select the channels that are most effective for their business.

When it comes to products and services, customers have more options today than ever before. Online shopping, digital marketing, and globalization are just some of the factors that have completely transformed how people make purchase decisions. As a result, customers can find something with different features, higher quality, cheaper, etc., with a simple search. But there’s one surefire way for marketers to get an edge. We’re talking about positioning in marketing.

Positioning – how you position your product or service in the minds of your audience – is an essential part of any marketing strategy. And it can be just what your business needs to stand out in a crowded marketplace.

In this article, we’ll explain what positioning is, why it’s important, and how you can develop a positioning strategy for your own business.

What is positioning in marketing?

First things first – what is positioning in marketing? Positioning in marketing means strategically defining how your ideal client perceives your business. It’s a component of branding where you choose how you will differentiate yourself from similar products or services. And while there are dozens of ways to do it, some tried-and-true types of positioning in marketing can give your business an advantage.

Your positioning strategy will include a mix of hard criteria – features, cost, quality, etc. – and relationship-building criteria that ultimately shape how a customer sees your brand. By clearly defining your business’ positioning and consistently taking action to communicate that, you’ll be better able to move customers from consideration to purchase.

When done correctly, positioning can be the thing that creates loyal customers, brand awareness, and all the other things you hope for when you make a marketing strategy.

Why is positioning important in marketing?

Now that we covered what positioning is, we can dig into why positioning is important in marketing. Ultimately, the goal of any positioning strategy will be to optimize how you sell your product or service – whether that means making that easier, less expensive, more profitable, more targeted, etc. Below are a few examples of how your brand can benefit from positioning.

• Sales. Let’s start with the big one: sales! A great product positioning strategy can either increase sales or expand your audience. By clearly defining your positioning, you’ll be better able to create relevant offers and communicate that to potential customers.
• Competitive Advantage. Another importance of positioning is that it helps your business differentiate itself and stand apart from the competition. Whether you choose to position your product around price, features, etc., or associate yourself with a target group or lifestyle, this will ultimately impact how customers view your offer relative to your competitors. When done effectively, the correct position will give you a competitive advantage over those offering something similar.
• Niche. So many business owners have gotten the advice: find a niche. The reason? With a niche, you narrow your target audience to a more targeted, hyper-specific group. In doing that, you position yourself as the expert and can create offers with this niche in mind. This makes your ideal customers feel that you’re speaking directly to them (because you are!), and every salesperson knows that’s the key to an impactful sales process.
• Clarity. Better positioning brings clarity and simplicity. Rather than starting every campaign, communication, or idea from scratch, you begin from a clear starting point. When you know what your brand represents and how you want your customers to perceive you, you can make clearer decisions and have more confidence that you’re taking actions that will help you reach your business goals.

Types of Positioning in Marketing

Now, let’s get into the types of positioning in marketing. There are almost endless ways that you might go about differentiating your product or service, but the key here is to focus on the things that matter most to your ideal clients.

• Features. One common way that marketers position their product or service is around unique features. Features are something your offer has or is. It could be something about the design, integration, or raw materials. To position yourself around features, ask: what features does your offer have that make it different from the competitor?

  Features Example: A headphone manufacturer might differentiate themselves with unique patterns and color options.

• Pricing. Pricing is a factor in most customer purchase decisions. Brands that position themselves around pricing typically focus on offering the lowest price while maintaining high quality (though high price positioning is also a strategy)

  Pricing Example: A software company that offers a license for small businesses at a lower price or doesn’t charge for a premium feature.

• Quality. When differentiating on quality, you might highlight the materials used, production process, or extended warranty on your product.

  Quality Example: A chocolate company that differentiates itself by sourcing fairtrade cocoa beans and being transparent about its production process.

• Differentiation. While most of the positioning examples above are differentiation to some degree, differentiation as a positioning strategy means being radically different from your competition. This can either be in your messaging or branding or in the design of the product or service itself.

  Differentiation Example: A self-help author who differentiates themselves from their industry by using swear words, dark humor, and bold language.

• Convenience. Convenience is about making it easier for customers to work with you. This might be based on location, usability, etc. Some common examples of how brands do this are offering one-stop shops, free returns, or mobile apps.

  Convenience Example. An online shop that offers free, no-label return shipping for all of its products to make customers more confident in their purchases.

• Comparative. Comparative positioning compares multiple products or services to establish a competitive edge. Again, while most positioning strategies include this at some level, some brands make a name for themselves just by being the complete opposite of their main competitor.

  Comparative Example. A health beverage company positions itself as an alternative to popular soft drinks.

• Customer service. Positioning around customer service happens when you make customer support more straightforward, friendly, helpful, or accessible.

  Customer Service Example. A local web design agency that gives customers a designated support specialist who offers same-day response to their questions or technical issues.

• User group. Positioning by user group is about narrowing your focus to a specific user group. While it’s still possible for you to serve different customers, your message should make it clear that you have something you specialize in.

  User Group Example. A real estate agency that specializes in working with first-time homeowners. Their marketing is tailored to these customers, and they create resources that directly address their needs.

How to create a positioning strategy

Ready to create a positioning strategy for your business? Let’s walk through the process, step-by step.

1. Define your current position

The first step in creating a positioning strategy for your business is understanding your current position. This is a process of clearly defining your current brand and ideal client. While you might have an inherent sense of these things, getting them down on paper is essential! This will allow you to understand the gap between where you are now and where you’d like to be.

Some questions you can ask in this stage are…

• Who are you, and what do you do?
• Who is your target audience?
• What are your mission, vision, and values?
• What makes you different from other people who do what you do?

In this stage, research some positioning examples for well-known brands. McDonald’s, Disney, Coca-Cola – you get the idea! These brands are household names for a reason, and they’ve invested millions of dollars and hours into getting it right. So think of some of your favorite brands, and look for case studies or samples of how they’ve done this for their businesses to understand how it might apply to your business or industry.

2. Perform a Competitor Analysis

At the heart of positioning is the differentiation of your businesses from similar businesses. That’s why performing a competitor analysis is so important. This is the stage where you’ll look at your competitors’ actions. How are they branding themselves? Who are their ideal clients? How are they positioning themselves? Some ways to do this are…

• Market research
• Customer feedback
• Social media analysis
• A positioning map (details on how to create one below).

Conducting a competitor analysis will help you understand the opportunities or gaps in the market and where your product or service has an advantage. Once you’ve done that, you’ll be able to figure out easy ways to differentiate yourself or have more clarity on how you might need to adapt your offer or messaging to better fit customer needs.

Here’s an article on how to perform a SWOT Analysis if you’d like some help getting started.

3. Develop your position

After reflecting on your branding and ideal clients and your competition’s branding and ideal clients, you should have the information you need to develop your own position.

Often, your position is clear. What do you do better than anyone else? Where can you differentiate your product based on the types of positioning we covered above? As a reminder, those are…

• Features
• Pricing
• Quality
• Differentiation
• Convenience
• Comparative
• Customer Service
• User Group

You might also consider more intrinsically valuable criteria – more relational or soft ones. This can be achieved with good branding or design. For example, perhaps your brand is more trustworthy, luxurious, or funny than your competitors. These can also be valuable ways to position yourself.

4. Write a positioning statement

Your positioning statement should describe your offer and target audience and directly address how it differs from competitors.

A good positioning statement in marketing should also be clear, brief, memorable, and aligned. Big undertaking, isn’t it? Hubspot made it easy with a template:

Positioning Statement: For [your target market] who [target market need], [your brand name] provides [main benefit that differentiates your offering from competitors] because [reason why target market should believe your differentiation statement.]

Start with a good framework, make some changes, and then continue to simplify until it reaches a clear and compelling point. If you’re struggling with the task, ask a couple of team members to try and see if you can get ideas from what they wrote.

5. Test your positioning

Creating a positioning statement is a great way to get clear and communicate your positioning internally. But ultimately, as positioning is about customer perception, the key to effective positioning is in how you actually communicate it externally.

This can be done with changes to your product, advertising, new branding, copywriting, design, etc. You might do it with a launch or subtle transition. But the key here is consistency! Building up a position takes time and continual effort. It almost surely won’t happen overnight. So create a strategy for the next several months about how you will share and reinforce your positioning with clients.

When that’s done, have some metrics in place to understand how it’s performing so you can adapt and modify it as needed.

Create a positioning map in marketing

Above, we mentioned the importance of a positioning map in marketing. Put simply, a positioning map is a graph with an x and y axis where each represents extremes of two key variables. You use the graph to plot your brand relative to your competitors’ brands to understand how you are perceived on the most critical factors.

You might start with a perceptual map showing how customers see your brand to understand where your brand is now accurately. This will help you understand the gaps between where you are now and where you want to be.

For example, you might create a positioning map where the x-axis represents price (inexpensive to very expensive) and user-friendliness (intuitive to many complicated features). From there, you might plot your business along with your top five competitors at various points on the map to understand where you can improve, find gaps in the market, or know how you can better represent your business relative to the competition.