It is very important to establish a quality communication budget as part of an effective marketing communication strategy. First off, allocation of corporate resources demands this function. Each department in a business enterprise receives financial resources to properly conduct their initiatives. A company must weigh which departments will receive how much, and combined this becomes the company's total operating budget.
Secondly, the communication budget is a guide to the head of the marketing communications department as to how much he or she can allocate to different communications activities. The department manager can proceed to divvy up the pie so-to-speak once they have their communication budget before them. They may allocate so much resources to social marketing, some to advertising, some to white paper development, some to press releases they write or hire freelance writers to write. These are just a few examples of the many ways they can communicate with their target market within their niche.
Third, a communication budget is important because it allows a company to perform analysis and comparisons. Essentially they can see whether they're getting a good Return on Investment (ROI) on the monies spent in communicating to their customers and potential customers. For example, a business may allocate $15,000 a year to communications as part of their marketing communications strategy. They can subsequently analyze whether their communications generated more sales and long-term customers.
If they garnered $18,000 in sales in a year from this $15,000 investment, was it worth it? Could they have spent that $15,000 elsewhere and achieved greater monetary results? This is where management has to analyze their budget, initiatives, and results, to effectively grow the company and increase their bottom line.