Do You Have the Right Marketing Budget? Here’s How to Find Out

Mar 23

How much should we spend? This is one of the most common questions in marketing. As brands put together strategies for how they can reach more customers and grow their business, they often don’t know how to set an exact budget.

Part of the problem is that there is no magic number when it comes to a marketing budget.

There are multiple factors that determine how much a brand should spend -- and even then, those numbers can change over time.

To help you figure out how to set the right marketing budget, here are some things to consider.

How to Find the Right Marketing Budget

One common way to set a marketing budget is by taking a percentage of your annual revenue or overall budget. Salesforce reports that marketing budgets often fits into a range of:

8.3-15% of revenue
11.3-17.3% of total budget

That’s a great starting point, but we think you should consider more than a standard percentage benchmark when setting a marketing budget.

We think it’s important to take a deeper look at goals, expenses, and competition if you want to come up with a more accurate marketing budget aligned with your unique needs.

Here are a few questions we like to ask.

Goals: What Are Your Business & Marketing Objectives?

The first place to start when setting a marketing budget is with your marketing strategy.

A marketing strategy lays out your goals and the steps you need to take to reach your objectives. It’s a great tool for setting your marketing budget as it helps you to see how much you need to spend in order to reach your growth goals.

The type of goals you have, the stage of your business, and historical marketing efforts will help you see if you need to spend more or less than the baseline marketing budget.

Consider the stages of marketing and how they impact budget.

Foundation: You are just getting started. You need to establish your brand, build out all of your marketing assets, and start to create brand awareness. If you’re just getting started, you’re going to need extra budget for establishing brand assets that will provide value over the lifetime of your marketing efforts.
Maintenance: Your marketing is established, and you have a solid sales flow and revenue stream. You need to maintain what you’ve already built. If you are in maintenance mode, you need a smaller budget than if you are in a foundation or growth stage.
Growth: You want to expand into new markets, grow your customer base, or launch new offerings. You need to boost your marketing efforts to reach a wider audience and drive more sales. If your goals are to grow, and take competitor market share, you will need to add to your budget to compete.

Knowing your competitive landscape, marketing strategy, and overall growth goals will help you determine if you need to increase or decrease from standard marketing budget benchmarks.

Expenses: What Do You Need to Budget For?

When you run marketing programs, you are going to have associated expenses. Consider those costs as you set your budget. These may be one-time costs or monthly or annual expenses. Factor them into your marketing plans to account for where you need additional funds.

Tools: You need tools to run your marketing efforts. List the software needed and calculate the cost associated with each.

Email marketing
Customer relationship manager (CRM)
Social media schedulers
Analytics / data reporting
Website hosting and maintenance
SEO reporting

Brand Assets / Creative: Conduct an audit on your brand assets, and identify gaps. Consider the cost of creating the missing assets as well as the cost of creating assets for your ongoing marketing efforts.

Brand guide
Brand identity
Buyer personas
Website
Print materials
Custom graphics
Stock images
Blog posts
Videos
Social media content
Advertising messages and creative assets

Advertising Budget: If your marketing strategy includes using online advertising, the cost needs to be added to your overall budget. Set aside a certain amount of your budget that will be paid out for Google Adwords, social media advertising, traditional advertising, or other paid ad channels.

Team: Marketing isn’t going to execute itself. You need to pay someone to lead and/or complete the marketing tasks outlined in your strategy. Make a list of the skills needed to complete your marketing strategy, and determine who will complete the tasks and how much it will cost for their services. Will they be vendors or will they be team members that fall into your people expenses?

Competition: What Is Normal For Your Industry?

By now, you should have a good idea about how much you need to set for your marketing budget. But, there is one other factor to consider -- your competition. Research your competitors to uncover metrics and trends that can help you both set and measure your marketing efforts.

Look for data on your industry’s average:

Marketing budget
Conversion rates
Cost-per-lead
Cost-per-conversion
Click-through-rates in search and social media marketing
Cost-per-click in search and social media marketing

Researching what others in your industry spend on marketing can help you:

Match industry averages. In Salesforce’s average marketing budget breakdown, they reported that B2B product brands spend 8.3% of their revenue on marketing, whereas B2C service brands spend about 15%. All industries are different. Find the averages for your industry and your business size.
See what you need to spend to be competitive. If your goals are to grow and out-pace your competitors, you will need to match their marketing efforts. Competitive research can give you an idea of how much you will need to spend to meet or exceed the competition.
Set your KPIs. When you know what is normal for your industry, you can set more realistic key performance indicators (KPIs). With KPIs, you can better measure your marketing efforts and determine if you need to make changes to your strategy or budget to match the average performance of others in your industry.

Reach Your Goals with the Right Marketing Budget

Unfortunately, there is no magic number when it comes to setting a marketing budget.

While there are guidelines that can help you get an idea of what to spend, you will need to consider your business goals, marketing expenses, and competitiveness in your industry to come up with the right budget for your unique brand.

If you need help developing a marketing strategy and budget that is right for your organization, let’s talk. SpotOn can guide you through the strategy and research process to help you create an accurate and effective budget that helps you reach your goals. Contact us to get started today.

Robyn Spoto