Allen has been handed a three-year contract by the Robins, with Baker hoping to see his club establish themselves as regulars in League One.
The former Brentford and Leicester boss replaced Keith Downing, who left the club on Saturday after a poor start to the season.
"Martin has been given a contract for not just this season, but for two more seasons," said Baker.
"We've always been a club that wants continuity in terms of managers. You can't build a team overnight.
"The challenge is to keep us in this division and that's not an easy challenge given where we are now and given our playing budget etc, so that's the first challenge.
"I think there are 17 players out of contract at the end of the season, so Martin will no doubt be looking at that over the next few months with half a mind on the next two seasons.
"By giving him another two years after that we are serious in making this club a proper League One team."
Meanwhile, Allen has made his first signing for Town, bringing in the veteran winger Scott Murray on a month's loan from Bristol City.