Effective marketing is an integral part of business success, but few companies understand how to create a practical marketing budget, how to spend it effectively, or how to measure the return on their efforts. When establishing your marketing budget, start by answering these four questions.

1. How long has your company been around? Naturally, new businesses should expect to spend more in order to build awareness in the marketplace. On average, new businesses spend 20 percent to 30 percent of net revenues on marketing, but some new companies may spend upwards of 50 percent with particularly aggressive efforts to build their customer base. In contrast, established businesses with high marketplace awareness may allot anywhere from 1 percent to 15 percent of net revenues.
   
   
2. What’s the standard practice for your industry? Some industries spend more on marketing than others. While industrial business-to-business operations may spend as little as 1 percent of net sales on marketing, on average, other industries may spend 10 percent or more. Gauge your industry’s standards by consulting industry publications, trade associations, and industry contacts.
   
   
3. What’s worked for your company in the past? Evaluate previous marketing activities, and use the results to craft a more effective marketing plan. In doing so, you’ll be able to set a budget baseline, identify the marketing activities that can best contribute to your organization’s growth, and prioritize the most effective ways to spend your marketing dollars.
   
   
4. What are your competitors doing? Your goal isn’t to outspend your competitors, but rather to outperform them. Knowing your competition’s spending habits can help shape your budget considerations in order to develop a competitive advantage. Hard numbers are difficult to obtain - especially from private companies that don’t publish annual reports -  but you can get a rough sense of how much they’re spending by keeping a close eye on their advertising and other promotional efforts.

Finding the right mix

Marketing takes many forms, and determining which activities will deliver the best results is another challenge.

Promotional activities are probably the most familiar. These can include advertising, public relations, trade shows, brochures, sales collateral, direct mail, newsletters, giveaways, and online promotions.

Companies should strive for a mix of activities that will help achieve two important marketing objectives - to create awareness with potential new customers (or move newer customers further along in the buying cycle), and to retain loyalty with existing customers. How much you dedicate to each activity depends on knowing the value new customers bring to your business, as well as the value loyal ones sustain for it.

Making it worthwhile

Your marketing activities and budget should reflect your company’s culture, image, products, and services. Companies must not only pursue the right kinds of marketing efforts, but they must execute them well, or the money will be wasted.

Rather than blindly assigning a percentage of your budget to marketing, take the time to assess your industry, corporate maturity, and business goals. Then establish a marketing budget tailored to your organization - and most importantly, track the results.