Making It Count: How Much of Your Budget Should Really Go To Marketing?

Business.com / Marketing Strategy / Last Modified: February 22, 2017

Wondering how much of your budget should really go in to marketing? And also where to allocate your budget?

There are so many marketing channels available for you to connect with your consumers: TV, print, email, content, social. The list goes on.

While this is great for exposure, it can be difficult to know where to allocate your budget, and more importantly, just how much of your budget should go on marketing.

Marketing spending appears to be on a dramatic upward curve, particularly for video marketing, with 91 percent of businesses saying they plan to increase or maintain their spending on video in 2016.

But, spending is dependent upon many individual factors, so it is difficult to apply one set budget for marketing to all industries and companies. What we can do, is create estimates based on these individual factors of your business, and that's exactly what we're going to do in this article.

Related Article: Make Every Dollar Count: Advertising on a Budget

How Much Should You Spend?

There are many contributing factors to consider before deciding how much of your budget should really go on marketing. These factors include things like:

  • What industry are you in?
  • What is your total revenue size?
  • What do you want to achieve?

In this section, we're going to answer these questions to help you determine how much you should spend on marketing.

According to FrogDog, as a general rule, companies looking to simply maintain their current visibility should spend five percent of their total revenue on marketing.

And companies that want to gain a greater market share should spend approximately 10 percent.

The study then goes on to state that within more competitive industries, such as retail, marketing spend should increase to anything between 20 to 50 percent of the company's net revenue.

These statistics are a great starting point, but don't really answer the questions above as accurately as, say, a survey of CMOs in a variety of different industry sectors and firm sizes.

The survey results below show the minute differences in spending between B2B and B2C:

cmo-marketing-budget-survey

It seems companies that provide services spend slightly more than those selling products. It also shows that B2C companies spend more on marketing than B2B.

The "spending as a percentage of firm revenues" row is interesting, as it shows that companies with the lowest revenue ($25 million or less) have the highest marketing budget.

But, what if you don't run a business with a six-figure turnover?

For small businesses, it's a little more complicated than simply assigning a percentage and sticking to it, because to a small business, ROI is everything.

As a small business, the best way to decide how much of your budget should really go on marketing is to do your research.

Take a look at your previous marketing efforts and continue doing what works while reducing your budget on campaigns that don't bring enough ROI.

The great thing about digital marketing is that it's so measurable. Use this to your advantage to create a clear view of what your marketing budget should be going forward.

Related Article: Like PB&J: Customer Service as a Marketing Strategy

How Should You Allocate Your Budget?

Once you decide on how much to spend on your marketing, your next thought should be about how to allocate your budget. Take a look at this excerpt from the Forrester Research Interactive Marketing Forecasts, 2011 to 2016 (US)

US interactive marketing spending graph from forrester research

As you can see, search marketing and display advertising receive the majority chunks of the budget, with mobile, email, and social following behind. This is a good indication of how to split your budget to compete with what other companies are doing.

However, like the results above, this chart is based on companies with an exceptionally large marketing budget.

If you are a smaller business and therefore have a smaller budget, you might want to check out this article by Entrepreneur for further advice.

It's also important to mention video marketing here as it was missed from the research excerpt shown above.

Video usage is accelerating at a phenomenal rate, so it's important to allocate some of your marketing budget to it, and, a recent Wyzowl survey discovered marketers are doing just that, with 67 percent saying they plan to spend more on video in 2016.

What Can You Expect in Return?

Obviously, if you're going to allocate and spend a budget on marketing, you're bound to want to know how much you can expect in return.

The bad news is, although digital marketing is very simple to measure, ROI is not. For starters, ROI can mean different things for different marketing channels.

On social media, you could class your ROI as how many new followers you gained from your campaign.

However, it may be difficult to calculate how many of these new followers became customers. On the other hand, content marketing, in the form of an eBook, for example, would be a lot easier to measure. Every download can be classed as a lead obtained.

The best way to calculate what you can expect in return is to see what works for other people and compare this to your own efforts. Take a look at the chart below:

return on investment chart

The results show that 47 percent of company respondents noted SEO and content marketing as good. However, only 30 percent of the respondents noted mobile marketing as good.

By comparing this chart to your own marketing efforts you should be able to calculate an estimate of what a good ROI for each marketing channel should be.

The main thing to remember is that if any part of your marketing campaign isn't bringing a good ROI, then you should probably stop allocating budget to this channel.

Related Article: Shallow Pockets: Tips for Hiring Employees on a Limited Budget

Final Thoughts

We've all heard the phrase, "You gotta spend money to make money", and when it comes to marketing, it couldn't be more apt.

The important thing is to make sure you spend a marketing budget that your company can afford, and allocate that budget in the best places to create a positive ROI.

If the results of this article prove anything, it's that marketing budgets differ from company to company, but hopefully the information given will help you to decide what your unique marketing budget should be.

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