7 Nonprofit Marketing Budget Mistakes + How To Avoid Them

Do you have an effective nonprofit marketing budget in place for the year ahead?

It’s never been more important to create one than it is now, with fears of a recession mounting and massive layoffs in tech pointing to an uncertain year ahead for budgets and workforces in all industries. Though, side note: all those laid off Salesforce and Google employees should probably flock to the nonprofit sector.

Marketing and communications are some of the first line items organizations choose to cut when uncertainty hangs over their heads or when finances get tight. But that’s a huge mistake. Marketing, communications and fundraising play a critical role in organizational growth, sustainability and mission advancement, and cutting their budgets at the wrong can time can make a tough financial situation even more precarious. These investments are not overhead, but unrealistic expectations from funders are driving too many nonprofits to treat them that way.

The solution begins with recognizing the problem. In this updated post, we’ll dive deep into the seven biggest mistakes that result from treating a nonprofit marketing budget as overhead and explain exactly how they harm nonprofit organizations. But don’t worry–this post is not all doom and gloom. We’ll also show you how you can overcome each mistake in order to set your organization up for sustainability and success for the causes and communities you serve, because they deserve it.

Nonprofit Marketing Budget Mistake #1: You have no marketing budget

Perhaps the biggest mistake your nonprofit can make when it comes to marketing is having no budget at all.

Organizations of every size and shape require some sort of marketing, communications and/or fundraising support to advance their missions. Your nonprofit is not an exception to this rule due to your unique model or structure, no matter how convenient an excuse that may seem for failing to invest in marketing. Marketing supports goals like:

• Engaging prospective donors and convincing them to give their money to your cause
• Recruiting program participants or end-users of the services your organization provides
• Driving brand awareness and affinity that establishes your organization’s credibility with government funders and foundations
• Attracting volunteers and community support
• Generating support for and organizing action around issues about which your organization advocates
• Driving social and behavioral change

While it’s unlikely that your organization is focused on every goal on this list, you’ll be hard-pressed to find a nonprofit that can’t relate to at least one or two of them. And so, every organization needs a marketing budget. Yes, that even includes organizations that don’t feel they need to fundraise.

When nonprofits fail to establish a marketing budget, they’re contributing to what the Stanford Social Innovation Review has bluntly called the Nonprofit Starvation Cycle, in which nonprofits are “left so hungry for decent infrastructure that they can barely function as organizations—let alone serve their beneficiaries. The cycle starts with funders’ unrealistic expectations about how much running a nonprofit costs, and results in nonprofits’ misrepresenting their costs while skimping on vital systems—acts that feed funders’ skewed beliefs.”

It’s bleak, but it’s true. And there are few areas of investment more misunderstood by funders (and more skimped on by nonprofits) than marketing and communications.

That’s due, at least in part, to our good friend the IRS, which has failed to provide specific instructions on how nonprofits should account for marketing and communications in their financial filings. The ambiguity around reporting on marketing spend leads many organizations to allocate their marketing and communications expenses to their programs, and keeps marketing from obtaining the dedicated budget it deserves.

Unfortunately, according to the Nonprofit Communications Trends Survey, nonprofit investment in communications staffing had not changed over the last five years, even as the expectations continue to grow. 

 When you develop your budget on an as-needed basis, every tactic, initiative and experiment becomes a major ask because you have to find a way to pull money from somewhere else. Even worse, budgeting on the fly makes it nearly impossible to track and measure the impact of your marketing and communications spend. How can you figure out which investments are driving your goals forward and which ones are falling flat when your marketing budget is a frenetic mix of as-needed one-off activities? You can’t. And that lack of accountability makes it difficult to make the case for deeper marketing and communications investments in the future. So the vicious cycle continues.

Nonprofit Marketing Budget Mistake #2: You’re allocating too little for marketing and communications

Any marketing and communications budget is better than a non-existent one. However, trying to drive meaningful nonprofit marketing initiatives with inadequate investments is a losing battle. Without the funds to support their goals, your marketing and communications team will simply spin its wheels and will end up with little to show for its time and effort.

So how can you figure out what your nonprofit should invest in marketing? It depends who you ask. Most nonprofits that have a marketing budget use one of the following methods to establish it:

• The percentage method: Marketing, communications and fundraising (which many nonprofits group as a single line item) occupy a certain percentage of the organization’s total budget–usually somewhere between 5 and 15 percent of the total–depending on the size of organization, its structure and its mission focus. This method makes it possible for your nonprofit marketing budget to scale as the organization scales.

• The dollar method: Marketing, communications and fundraising are given a set dollar amount based on past expenditures. This method simplifies projections and makes expectations clear.
  
• The incremental method: Incremental budgets set up a specific percentage by which marketing, communications and fundraising budgets will increase or decrease on a regular (usually quarterly) basis based on immediate past performance.

All of these methods are inherently flawed, especially the first two. But I’ll get to that in a minute.

For now, simply do some quick math. With staff salaries included, does your nonprofit marketing budget (or marketing/communication/fundraising budget) represent at least 5 percent of your organization’s total annual operating budget? If not, you’re grossly underinvesting in an area that holds huge potential to spur your organization’s growth and mission impact.

Nonprofit Marketing Budget Mistake #3: You’re basing your nonprofit marketing budget on anything other than goals and expected outcomes

Meeting a basic investment requirement (that 5 percent figure) is a start, but budgeting strategically is far better.

Despite its widespread use, the percentage method is a highly ineffective tool for developing a  nonprofit marketing budget. It assumes that your marketing and communications should follow the growth of your organization, when in fact, it’s the other way around. Your marketing should be a growth driver. The dollar method is even worse. It bases future investments on past spending, which is almost sure to keep your organization’s growth and impact stagnant. And the incremental method is only slightly better. It forces nonprofit marketing and communications teams into a rollercoaster ride in which they can never adequately plan their work or optimize their effectiveness based on the results of their initiatives.

Instead of defaulting to one of those three flawed methods, your organization should adopt what we call “adaptive, goal-based budgeting.” This approach bases your marketing budget not on a percentage allocation or on past performance, but on marketing’s expected (and measurable) impact on your organization’s broader strategic goals.

The beauty of adaptive, goal-based budgeting is that it’s totally accountable. Each dollar spent on marketing, communications and fundraising has a meaningful return on your organization’s goals, and budgets are constantly optimized so that the tactics and initiatives with the highest returns take priority. This allows marketing to occupy the growth driver role it deserves and truly further your organization’s impact rather than simply supporting it.

If you still need inspiration for building a nonprofit marketing plan that your budget can accompany, check out this nonprofit marketing plan example.

Nonprofit Marketing Budget Mistake #4: You’re underinvesting in your nonprofit marketing talent

Talent is, without a doubt, the most important component of any nonprofit marketing and communications effort. Your staff salaries should always be the biggest line item on your nonprofit marketing and communications budget. But even if you’re already spending more on staff than on advertising, partnerships and other paid efforts, there is still a good chance you’re underinvesting in your nonprofit’s marketing talent.

There are two ways this mistake typically presents itself: through a team that is too small to address the needs of the organization or through staff salaries that are too low to attract and retain top talent.

In their Nonprofit Communications Trends Report, The Nonprofit Marketing Guide found that the least effective nonprofits devote a portion of their overall budget that is below the average for organizations of their size to their marketing and communications staff salaries. Your organization’s overall budget is the best indicator of how many full-time staff you should have on your nonprofit communications team, so take a look at this graph to figure out where you should fall.

But it is possible to have an optimally staffed marketing team and a nonprofit communications budget that is allocated primarily to employee salaries and still underinvest in your nonprofit marketing talent. When that happens, undermarket staff salaries are the culprit. Salaries are on the rise in many subsectors, but on average, nonprofit marketing and communications professionals still earn far below the salary that someone in a comparable corporate position can expect.

Based on the latest available data, the average corporate Marketing Director earns on average $23,853.00 more per year than the average nonprofit communications director (a comparable role). The closest corollary to the corporate Account Executive is the nonprofit communications coordinator, and they earn $7,500 per year less than their for-profit counterpart.

Nonprofit budgets will always be tight, but we need to let go of the misguided belief that nonprofits can pay less for top talent than their corporate counterparts simply because they’re “doing good.” Employees are not overhead, and your organization needs to be able to attract and retain the best and brightest marketing talent for the sake of its mission. The nonprofit sector can’t afford to lose its top performers to the corporate world simply due to substandard compensation. It’s time to demand that nonprofit funders, supporters and decision makers help organizations find a way to compensate competitive talent with salaries comparable to what these employees could expect to earn in similar corporate roles.

Nonprofit Marketing Budget Mistake #5: You cut marketing first when times get tight

We already discussed the apprehension many nonprofits have been feeling lately around their budgets as a result of the tenuous economic climate. This fear is driving many organizations to search for ways to pre-emptively trim their budgets, and marketing and communications are often the first line items to draw scrutiny.

To some uninformed funders and decision makers, marketing might seem like a “nice to have” luxury rather than a necessity. But that couldn’t be further from the truth. Cutting your nonprofit communications budget when times get tight will typically have the opposite of its intended effect. It will cause you to begin to lose the traction you’ve built with donors, supporters, program participants, and volunteers, and your financial sustainability will decline right along with that traction.

As Henry Ford once said, “A man who stops advertising to save money is like a man who stops a clock to save time.” That same thinking applies to marketing and communications as a whole.

Rather than dialing your marketing budget back in tough economic times, think about how you can better optimize your spending and innovate your approach to produce faster, better results that get your organization’s overall budget back on track.

Nonprofit Marketing Budget Mistake #6: You treat marketing, communications and fundraising as one lumped line item in your nonprofit budget

Up until this point, we’ve talked about marketing, communications, and fundraising as if they’re one standalone line item in your nonprofit’s budget. And that’s because most nonprofits treat them that way.

But failing to differentiate between these important functions can make your marketing budget ineffective and nearly impossible to optimize.

Before you think about how to divide these items up in your budget, make sure you actually understand how they differ from one another from a functional perspective. Consider these definitions:

• Nonprofit communications is the two-way exchange of information between a nonprofit and its stakeholders, such as staff, board members, donors, program participants and volunteers.
• Nonprofit marketing comprises the activities, touchpoints and messages that motivate stakeholders to take actions that advance a nonprofit’s mission and create sustainable social change.
• Nonprofit fundraising is the process of soliciting financial support for an organization by building, strengthening and sustaining relationships with individual donors, foundations, corporations and other supporters who are aligned with the organization’s mission and goals.

Fundraising is by no means the only goal that a nonprofit marketing and communications team should address, though it is an important one. For example, the YMCA has an important marketing goal related to driving membership that has nothing to do with fundraising. But on the flip side, not all fundraising activities are marketing activities. The money YMCA of the USA spends cultivating one-on-one relationships with its major donors (taking them to sporting events or sending them thank you gifts, for example) falls squarely into the category of fundraising. 

Often, marketing and communications take a one-to-many approach, while fundraising takes a one-to-one approach (though there are certainly exceptions to this rule, especially in today’s digital world).

There will always be some areas where marketing and fundraising overlap. What’s important is that your nonprofit establishes a set standard against which expenses are categorized as marketing and communications or fundraising based on your unique circumstances and structure, and your nonprofit communications budget should follow suit. I’m especially fond of the process the American Red Cross has established, in which all fundraising activities focused on cultivating small donors fall into the marketing budget (which also has several other components related to non-fundraising goals), while all activities related to major gifts fall into the fundraising budget.

Nonprofit Marketing Budget Mistake #7: You’re not evolving your marketing budget

As we discussed last week, the most effective budgets are based around goals and expected outcomes. That means you need a marketing plan before you can have an effective budget. If you don’t yet have one in place, take a look at this nonprofit marketing plan example. It also means your marketing, communications and fundraising budgets need to evolve every time your organization’s goals evolve. Simply re-evaluating your budget every fiscal year is not enough. Instead, you should assess your budget monthly (or at the very least quarterly) through the lens of your organization’s broader strategic picture and performance.

If you’re ready to get serious about optimizing your nonprofit communications budget and approach, drop us a line. We specialize in helping nonprofits achieve their goals and advance their missions through marketing and communications, and we’d love to help you get more from your marketing spend.

Originally published April 11, 2017 and updated on January 25, 2023

Header image photo credit to stubblepatrol.com