How much should you spend on marketing? A complete guide to marketing spend.
Updated September 15, 2023
Marketing is, undoubtedly, an important tool to grow your business. Without marketing, even the best products, services, and ideas remain unknown.
A perfect marketing strategy is a road to popularizing your brand, selling your products and services, and growing your business.
Every successful marketer’s job is to create a budget that helps the company achieve better growth each year while choosing the most cost-effective strategies for the company.
From social media marketing and advertising to SEO and content marketing, there are different channels to distribute your marketing budget. The trick is to find out which marketing channels work the best for your business and how much should you invest in each of these.
Let’s dive in and find out everything there is on marketing budget and how much should you be spending for business growth every year.
Why is a marketing budget important for businesses?
The marketing budget of any business is the blueprint of its marketing expenses.
It ensures you have sufficient funds to efficiently allocate resources to different marketing strategies, without overspending or disrupting funds for other strategies.
There are many things a business achieves by having a marketing budget.
Allows for strategic allocation of resources to maximize the effectiveness of the marketing campaigns.
Enables businesses to reach and engage a wider audience, enhancing brand awareness.
Supports the creation of high-quality and impactful marketing materials.
Facilitates regular tracking and analysis of campaigns, leading to informed decisions and mid-way adjustments.
Helps explore innovative marketing channels and strategies.
Enhances the potential for a higher return on investment (ROI).
Helps maintain consistency in marketing efforts, reinforcing brand messaging over time.
Enables businesses to stay competitive by adapting to market changes and capitalizing on emerging marketing trends.
What does the marketing budget include?
No company, be it small or large, should avoid a marketing budget if it creates and follows a strategic marketing plan. A good and comprehensive marketing budget should include:
1. Content Marketing
Content marketing is unavoidable in today’s competitive digital landscape. It is a crucial marketing channel for B2B and B2C companies to promote their brand, attract new customers, and keep their audience hooked. From blogs to case studies and ebooks, companies use different strategies to market their brand. As per Semrush, regularly creating and posting content gives a 55% boost to your online rankings, ultimately leading to an increase in traffic and conversions.
Image: Semrush
2. Email marketing
As per a Litmus 2022 report, every dollar invested in email marketing gives an ROI of $36, which is why it is one of the important marketing tools for B2B and B2C companies. It not only gives a better ROI for existing customers, but also has a low customer acquisition rate than some of the other marketing channels. The cost for email marketing depends on your business size and your goals, besides the software you plan on using for sending emails.
Image: https://www.litmus.com/
3. Social Media Marketing
Social media marketing covers different channels like Facebook, Instagram, Twitter, Snapchat, and LinkedIn. Brands need to decide which channel works the best for them depending on their target and current customers. For current customers, you only need regular social media management, for new customers, you need to invest in social media ads. The ads on social media are charged on a PPC (pay per click) model as well as on impressions basis.
4. Influencer marketing
Influencer marketing is a great way to reach thousands or millions of potential customers at once. It works by collaborating with influencers who have a substantial online following. The cost for influencer marketing covers compensation, products, or services provided to influencers. While influencer marketing can offer high ROI through authentic engagement and expanded reach, costs may vary based on influencer popularity, content type, and campaign scope.
Influencer marketing is most often used in B2C brands. However, B2B brands can think about influencer marketing as creating brand ambassadors with their partners and current and past clients. Common strategies can include referral programs, developing case studies, and video testimonials to leverage their networks.
5. SEO (search engine optimization)
SEO helps move your webpage to the top position, or top page of Google for the search query you work on. It involves working on onsite and offsite optimization.
Onsite SEO - Includes optimized website content, blogs, optimizing meta-tags, heading tags, alt text, structured markup, internal link building, and other technical elements like page speed, sitemap, robots.txt, and more.
Offsite SEO - Includes guest posting, link building, social media mentions, content shares, reviews from customers, and more.
SEO works for every type of business and industry. You might do SEO in-house or hire an external agency to do it for you. SEO is a continuous process, and the cost may be in the thousands of dollars.
6. Paid search advertising/Google ads
Many brands invest in Google ads. It works on a pay per click model, meaning you pay every time someone clicks on your ad. Good keyword planning is necessary to analyze your keywords and run your ads to get the best results for your niche. You can pre-set a budget for displaying your ads on Google.
7. Traditional marketing
Traditional marketing channels include print ads, TV commercials, radio spots, newspaper ads, and direct mail. These strategies involve costs like media placement, printed materials, and distribution. For B2B this could also include conferences and sponsorships. Carefully take into account traditional strategies considering factors like target audience preferences and evolving market trends.
Besides these, a good marketing budget also entails costs like:
Tools and software expenses that the business might incur to create marketing campaigns, manage leads, or analytics management tools.
Expenses for hiring internal marketers, a marketing agency, or freelancers for getting the project done (read: Agency vs In-House).
Costs associated with promotional events, discounts, giveaways, and other tactics to attract and retain customers.
Expenses for research on customer preferences, market trends, and competitor analysis to align marketing strategies.
Website technical maintenance and content updates.
While there are many channels and strategies for marketing, there’s no hard and fast rule to utilize all of them. Learn the best strategies for your business and allocate funds to the ones most suited to your business type.
Now that we know what a marketing budget includes, let’s talk about how to define your total marketing budget.
How to decide on your total marketing budget?
Determining your total marketing budget requires a well thought-out approach. Let's look at some viable strategies you should be taking into account before creating the final budget.
This involves considering budget as a percentage of revenue, budget by industry, years your business has been in the industry, B2B vs B2C, and by different marketing channels companies allocate to.
Marketing budget as a percentage of revenue
The total marketing budget can be defined in two ways: as a percentage of total revenue or as a percentage of the company’s total budget.
As per CMO Survey, March 2023, marketing will take around 12.3% of the company's total budget in the present year. When it comes to percentage by revenue, marketing will comprise 10.9% of company revenue in 2023,increasing by an increment of 2.2% from September 2022.
Image: CMO Survey
For small companies, 52% of 85 survey participants said, that they spend $5–$15,000 per month on marketing.
Image: databox
As per CMO Survey, March 2023, here is the breakdown of marketing budget as overall company budget and as percentage of company revenue.
Image: CMO Survey
B2C and B2B marketing budget allocation
Let’s talk about B2B and B2C sectors. As per CMO Survey, March 2023, the B2C ‘product’ sector keeps around 16.1% of the total revenue for marketing, while the B2C ‘services’ sector dedicates 10% of their revenue to marketing.
For the B2B sector, 8.5% of total revenue is dedicated to marketing in B2B ‘product,’ while 10.3% of company revenue accounts for marketing in B2B ‘services’ sector.
Image: CMO Survey
Average marketing budget by industry
Your industry, too, is a huge factor in deciding your marketing budget. As per CMO survey, March 2023, here is the breakdown of marketing budget by industry.
Industry | Percentage of Revenue |
Banking, Finance, Insurance | 15% |
Communications Media | 7% |
Consumer Packaged Goods | 24% |
Consumer Services | 5% |
Education | 5% |
Energy | 6% |
Healthcare | 11% |
Pharma, Biotech | 5% |
Manufacturing | 20% |
Mining, Construction | 4% |
Professional services | 22% |
Tech software platform | 29% |
Real estate | 3% |
Transportation | 9% |
Retail, wholesale | 16% |
Marketing budget for a startup vs established companies
Age of your company is another factor in analyzing your marketing budget. New companies (1-5 years in business) should spend more on marketing than older established companies (5+ years in business with brand equity and market share). As per Hubspot, the average marketing budget for a startup should be 11.2% of overall revenue in 2023. This percentage would give you a decent amount to build initial brand awareness and start attracting leads.
Established companies, on the other hand, only need to allocate 6 to 12% of gross revenue to their marketing budget, since they likely already have consumer brand awareness and support.
Forbes’ take on marketing budget allocation is to keep two budgets in mind:
One budget to sustain current revenues
A second budget for robust growth
If you want to maintain current revenue amounts, then 5 to 10% of sales allocated toward advertising may suffice. If you want rapid growth, then you may need to push that number higher, possibly to 20% or more depending on the industry and type of business you operate.
Budget allocation to different marketing channels
Deciding on the channels you want to focus on can also be challenging but is important in helping you define your marketing budget. Here is a chart that gives an estimate of marketing budget allocation to different channels at large companies across North America, the UK, Germany, and France.
Image: Statista
Consider the above factors before finally creating your budget. And, if you’re still not sure, follow the 70-20-10 rule.
Allocate 70% of your budget to proven strategies that you know can get you a good ROI.
Dedicate 20% to new strategies that ‘might’ bring in good results.
Reserve 10% for experimental and unused tactics.
Creating a marketing budget
Just knowing the marketing budget by percentage of revenue and industry won’t help you in creating a workable budget for your business. Here are some steps you can take to create a strategic marketing budget for future business growth.
1. Analyze your business goals.
It is critical to analyze your long-term and short-term goals before creating a budget. Why? Because knowing your goals prevents you from unnecessary spending and drives you to strategically spend on things that help you achieve your business objectives. Some of these business objectives are:
Brand awareness
Increase traffic to your website
Lead generation
Increase in subscriptions
Increase in social media followers
These goals will define your marketing strategies, channels, and the funds you will need to allocate to each one of them. Do not set unrealistic goals like increase in sales because it won’t give you a precise target to achieve. Instead, set realistic goals like increase in traffic or lead generation, especially for B2B companies with long sales cycles, as these results will be measurable and achievable.
2. Understanding the buyer journey.
The steps through which a lead goes from being a prospect to being an actual customer, is its buyer journey. From awareness to conversion, your buyer journey informs how the prospect interacts with your marketing strategies while going through each stage of the sales funnel. This gives you an idea of where to utilize your efforts and resources to direct your prospects to complete the sales funnel.
Based on the understanding of your buyer journey, you should allocate funds to each stage as needed.
The awareness stage might require more funds to implement strategies to capture the attention of a huge potential customer base.
The consideration phase could involve using informative content like blogs, gated/ungated white papers, and case studies to help them make an informed choice.
The decision stage might require a budget for high-value offers to help them convert.
The marketing budget, when aligned with customer behavior in the buyer journey helps the target customers to complete the sales funnel and the brand to achieve its goal. It minimizes wasteful spending on approaches that don't resonate with the audience and maximizes ROI by catering to specific needs at different stages of the journey. In the image below, Gartner 2023 CMO Spend and Strategy Survey reveals what budget allocation looks like in 2023 as per ‘buyer journey.’
Image: Gartner
3. Know your hidden costs.
Overlooking your hidden costs while creating your marketing budget can lead to budget overrun causing a disruption in further campaigns and poor financial health. Therefore, it is crucial to include your hidden costs like customer research, content creation, graphic design, website design revisions, software purchase costs, event marketing, employee payouts, product testing and trial, and more.
A perfectly strategized marketing budget involves all the potential hidden costs, and comes with a contingency risk buffer to cover unexpected charges and mid-way changes in marketing plans. Incorporating these hidden costs makes your marketing budget accurate, realistic, and well-prepared to handle unforeseen challenges that might arise during the course of your campaigns.
4. Analyze your market.
Research and analyze your market to gain insights on what marketing trends, customer behaviors, and evolving demands are. This will help you in making informed decisions and allocating resources to strategies that align with current market dynamics, ensuring relevance and resonance.
These tactics help you
Capitalize better on your efforts and funds.
Make the campaigns more productive while lowering unnecessary spending.
Better resource allocation to achieve goals while navigating a dynamic and competitive market environment.
5. Define your channels.
After a thorough understanding of the market, your competitors, and the gaps in the market, you might have a slight idea of what strategies or channels you could utilize for your business. Follow the steps below to further deepen your analysis.
The target audience.
The first step in choosing your marketing channels is to find out your target audience, their demographics, needs, preferences, and behavior. Make the buyer personas of your ideal customers, and find out how they search for your industry-related products or services. This way you can align your strategies with their expectations and present them exactly what they are looking for and where they are looking for.
Consider your products/services.
You might want to analyze your industry and your offering before deciding the channels you want to focus on. For example, if you are an eco-conscious clothing brand, social media channels like Instagram and Facebook could be your best bet to reach your audience with your targeted messaging, while content marketing, LinkedIn, SEO, and email marketing would definitely work for B2B companies. Besides, if your product or service is a little complex, you might want to focus on direct channels like email marketing to demonstrate and educate your audience and convey the benefits of your offering.
Study your competitors.
Conducting a thorough research on your competitors also lends a helping hand in analyzing your marketing channels. Conduct a SWOT analysis to pinpoint your strengths, weaknesses, opportunities, and threats concerning both competitors and their chosen channels. It also helps in understanding where your target audience engages and the gaps in competitors’ strategies. This way you can focus on strategies that align with audiences in similar demographics. Furthermore, observing competitors' missteps aids in avoiding ineffective channels. By learning from their experiences, you can allocate resources efficiently and optimize your marketing efforts for better results.
Consider resources.
Next, compare different channels with respect to cost, reach, control, time, skills, and technology needed for feasible channels that you could work on.
6. Measure your ROI (return on investment).
Measuring your ROI and finding out if the budget you created actually worked is crucial to planning marketing spend in the future. To track your ROI, assess your revenue from sales, generated leads, increment in website traffic, and customer acquisition cost. This will help you analyze the effectiveness of your strategies and find out the ones that were most successful to shape up your future marketing budget accordingly.
On the most simple level, marketing ROI can be calculated by the following formula:
(Sales Growth - Marketing Cost) / Marketing Cost = Marketing ROI
This assumes that all marketing is helping to drive all sales.
If you want to know the ROI of specific campaigns or channels, calculating ROI becomes difficult without highly sophisticated marketing and sales tracking. It also doesn’t take into account the ads a prospect sees multiple times from multiple channels before they take an action. That’s why having goals that can be easily tracked (like website traffic or lead forms) is important.
Now that you understand what a promising marketing budget looks like and how it is created, read on further to get some tips on making the most out of this budget.
Tips to maximize the value of your marketing budget.
1. Align your strategies with each other.
One way to get the most out of your marketing budget is to use strategies that work in favor of each other. For example, SEO and content marketing are two strategies that enhance the result of each other. They are incomplete without each other and work separately too. While content helps establish the relevance of the target keywords (SEO), SEO works on getting traffic to the content for more shares, views, and conversions. This strategic pairing helps you to efficiently utilize your resources and deliver better results.
2. Phase out strategies that don’t work.
Consistently measuring your ROI is critical to analyzing the strategies that do not work in your favor. As a marketer, you understand that results take time, but if you consistently see low or no ROI in some strategies even after months, put a pause on them. This will help you in optimizing your budget towards the right strategies.
3. Always test your strategies.
To get better ROI on your marketing spend, use A/B testing to experiment with variations, like messaging, website design, or landing page, and identify what resonates best with your audience. Fine tune the strategies accordingly. Continuously monitor performance, adjust approaches, and allocate resources based on real-time data to ensure efficient budget utilization and improved results.
4. Invest in repurposing content.
Creating unique content is time consuming and expensive, which is why repurposing is a better option to rank on your SEO efforts in tight budget. Start by creating unique, valuable, and informative long-form content. Now, repurpose this content in different content formats like infographics, videos, pillar pages, how-to guides, and more. This helps you leverage one piece of content multiple times and drive your budget to more unique content.
5. Work with experienced professionals.
While it's your choice to either hire professionals in-house or an agency, it is suggested to work with experienced professionals who understand the market and marketing trends through and through. Working with these professionals will give you and your team a wide angle of the market and help you achieve your goals in less time within your set budget.
Wrapping Up
Creating a marketing budget is a process that requires accessing your business goals and industry trends, understanding your target market and your buyer journey, and having available resources. Regularly monitor the performance of your campaigns and make your budget adaptable to evolving marketing trends and sudden shifts in market. Remember, a well-optimized marketing budget is not just an expense but an investment in your business growth and success.
Need to learn how to advocate for your marketing budget? Check out our article: How to advocate for your marketing budget.
A conscious marketing spend
When working with a new client, our approach begins by looking at their brand and company as a whole: researching everything from the overall industry market and their competitors to understanding what their audiences are thinking, feeling and seeking.
With all the collected data, we are able to consciously craft strategic and thoughtful marketing activities tailored to each brand’s need in telling their story. Our research-backed and intentional approach also applies when working with a client on their marketing budget. We will partner with you on finding the right allocation options for you, spending carefully and consciously with purpose and intent.
Whether your business is new or established, we are excited to support you in finding the right path to take your brand’s storytelling to the next level.
Contact us to learn more about how we can help find the right marketing budget and strategies for you.