Essential Marketing Budget Terms to Understand
Budgeting can be complex, especially when it comes to the key terms that guide your marketing plans. Understanding these terms is a simple way to navigate the intricacies of budgeting. Read on and get familiar with the most important concepts to make your budgeting process smoother.
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Why should you use a budget board?
As a newly launched business, you may need to set up systems and practices for various functions like marketing, sales, operations, finance, and more, often from scratch. One critical aspect of marketing is setting budget, as it provides a comprehensive view, helps you plan your marketing expenses, and supports the growth of your business.
Key Marketing Budget Terms
ROI (Return on Investment)
ROI is a crucial metric for evaluating the revenue generated compared to the amount spent on marketing campaigns. The formula to calculate ROI is: (Revenue - Cost) / Cost x 100
CAC (Customer Acquisition Cost)
CAC measures the cost of acquiring a new customer through marketing efforts. It's calculated by dividing total marketing expenses by the number of new customers acquired within a specific period: CAC = Total Marketing Expenses / Number of New Customers
CLV (Customer Lifetime Value)
CLV represents the total revenue a customer is expected to generate over their lifetime relationship with your business. By comparing CLV to CAC, marketers can gauge the long-term profitability of acquiring customers through different channels. The key to sustainable growth is maximizing CLV while minimizing CAC.
CPL (Cost Per Lead)
CPL measures the cost incurred to acquire a single lead. It's calculated by dividing total marketing expenses by the number of leads generated: CPL = Total Marketing Expenses / Number of Leads Generated Optimizing both CPL and conversion rates helps marketers improve lead generation efficiency and maximize the ROI of their campaigns.
Conversion Rate
The conversion rate refers to the percentage of leads that convert into customers. By optimizing this rate, businesses can better assess the success of their marketing efforts in driving customer actions.
Conversion Ratio
The conversion ratio measures the ratio of conversions to the total number of visitors or leads within a specific time period. It’s used to evaluate the effectiveness of a marketing campaign, website, or sales funnel in converting visitors or leads into actions such as making a purchase, signing up for a newsletter, or filling out a form.
ROAS (Return on Ad Spend)
ROAS provides insight into the effectiveness of your ads in generating revenue. The formula to calculate ROAS is: ROAS = (Revenue from Ads / Ad Spend) x 100
These are some of the key marketing metrics to keep in mind when creating your budget.
We’ve attached a spreadsheet below where you can input your budget plans for different campaigns, activities (like emails, social media, events), and timelines.
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In Zoho Marketing Plus, you can easily enter your budget based on your plan, add expenses, categorize them, and analyze your spending more effectively with the help of graphs and charts.
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In this page, we have discussed key metrics to consider when building your marketing budget. We've also attached a free downloadable spreadsheet with a pivot table to help you plan and analyse your spending.
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