Hummingbird’s Guide to Determining Your Media Budget

Hummingbird CreativeBranding & Creative

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Media Budgeting For Your Brand

Because we work with many local businesses, one of the toughest concepts some clients try to tackle is determining their media budget. Although some marketing initiatives just require your time, like networking, asking for reviews, or asking for referrals, some require a financial investment– oftentimes a significant investment for a small business. From your online marketing and print ads, to direct mail and broadcast media (think radio and television spots), it’s a fact that you have to spend money to make money. Because this can be tricky, we’re often asked to present a media plan to show clients how much they should spend. Before we embark on a plan that requires a lot of time and investment, it’s best to determine a general budget range to start with. This was, we won’t waste time presenting media options that don’t make sense, and we can spend more time making sure we are planning the very best way to allocate the media budget. There are two general ways to determine your media budget.

Media Budget As A Percentage Of Projected Annual Revenues

The first way to figure your media budget is as a percentage of your brand’s projected annual revenues. We have access to annual national media ratio reports to help clients determine how much they should spend. For example: A healthcare practice in the Raleigh area is looking to create a media budget. As of the end of 2017, the percentage range for most medical practices is 6.2 percent of projected annual revenue. If their projected annual revenue is around $1 million, their prospective media budget should be around $62,000 for the year. Other industries have their own percentage ranges. The breakdown is:
  • Education: 18.5%
  • Consumer services: 17.4%
  • Transportation: 11.2%
  • Consumer Packaged Goods: 11%
  • Service Consulting: 9.4%
  • Tech/Software/Biotech: 8.5%
  • Communications/Media: 6.6%
  • Healthcare: 6.2%
  • Banking/Finance/Insurance: 3.9%
  • Retail/Wholesale: 3.8%
  • Energy: 2.2%
  • Mining/Construction: 2%
Even within markets there can be different breakdowns. B2B companies in the healthcare industry may spend less than a B2C company because they’re spending more on media buys, including broadcast, print (newspaper and magazines) and online pay-per-click campaigns (PPC).

Media Budget Based On ROI

Another good way to determine a media budget is to base it on Return on Investment, or ROI. Generally, it makes sense to figure somewhere between a 3:1 ROI to a 10:1– earn $3-10 for every $1 spent on media. Larger, more established brands and consumer brands (or B2C brands) can expect a higher return for their investment. Smaller, less established brands, brands going through a rebranding effort, or B2B brands can expect a smaller return. This is a good method to use if you want to gain significant growth over the course of a year. For example, if you want to grow your business by $200,000 over the next year and you’re a small– but well established– brand, you could logically figure a 5:1 ROI, meaning your media budget should be about $40,000 for the year. The sooner you carve out a media budget, the sooner you can start to truly measure and understand the impact of the spend to your bottom line results. Make sure to review your budget on an annual basis and adjust the numbers as your business grows or your media mix changes.
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