The Ultimate Marketing Budget Breakdown

Posted on July 16, 2024 in Blog

You’ve got to spend money to make money, but what’s the best way to set (and stick to!) a dedicated budget?

Take the guesswork out of your marketing budget allocation with an in-depth look at the real cost of marketing.

Grab your TI-89 calculator, and let’s dive into your marketing budget breakdown!

Download the free spreadsheet here:

What Percentage of Revenue Should Your Company Spend on Marketing?

One of the traditional ways to establish a marketing budget is to base advertising spend on a set percentage of company revenue. A lot of companies stick to this maxim to generate an annual marketing budget that reflects changing company growth or challenges.

A Gartner CMO survey found that publicly traded companies spend about 11% of total revenue on marketin g, with as much as 75% of that budget going to digital.

However, the typical marketing budget (for non-publicly traded companies) is influenced by industry, audience and cash flow.

There’s no universal or “typical” marketing budget based on a percentage of revenue or sales, but revenue is a great place to start. Many of the recommendations here are based on the Gartner survey mentioned, plus our additional research.

It’s also the product of our digital marketing agency’s 20+ years of experience with clients of all industries and sizes …

A Simple Marketing Budget Breakdown

If you’re looking for quick-and-dirty advice …

Spend about 5 – 6% of your total revenue on the marketing channels that make the most sense for you, including:

Reputation and loyalty program management
Event marketing
Channel marketing, referral partnerships, etc.
Content writing and implementation
SEO (We recommend combining SEO with content writing – always.)
Video marketing
Traditional advertising (non-digital)
Surprise expenses + experimentation with new channels and strategies

Spend a little more (about 7 – 8%) on each of the following that applies:

Social media marketing
Website development maintenance
Market research
Analytics tools and services
Spend the most (about 8 – 15%) on these, as they apply:
Paid search and display advertising
E-commerce technology and services

The above guidelines should be a great starting point for your marketing budget plan. Adjust these expenditures based on the most relevant marketing budget categories for your operations; our strategy team can help nail down the right numbers!

Average Marketing Budget by Industry

Once you have a feel for your revenue and marketing budget categories, compare your allocated marketing budget with industry peers. You’ll note some industries, like energy, hardly spend anything on marketing. Companies with high-friction services don’t invest a lot in marketing. It’s hard to leave your utility company or bank, but easy to shop at a different clothing store.

Industry: Marketing Budget Percentage by Industry

Budget as a % of company revenue

Banking, Finance, Insurance, Real Estate: 8%
Communications Media: 10%
Consumer Packaged Goods: 9%
Consumer Services: 6%
Education: 3%
Energy: 1%
Healthcare: 18%
Manufacturing: 13%
Construction: 3%
Retail Wholesale: 14%
Service Consulting: 21%
Technology: 21%
Transportation: 6%

Another Wrinkle in Your Marketing Budget Allocation Model: Your Brand’s Age

Growth-stage companies need to invest substantially more in their digital marketing budget than their established peers. The key to gaining market share is often increasing brand awareness and putting your brand in the same conversation and decision-making process as your competitors. It’s recommended that young companies should invest between 10-20% of gross revenue, or roughly twice as much as their well-known peers.

How to Allocate Marketing Budget Effectively

Finish off your advertising budget by comparing the cost of digital marketing with traditional marketing channels. Then, evaluate your marketing ROU by comparing efficiencies across marketing budget categories.

Let’s get into it!

Download the free spreadsheet now:

1. Digital Marketing vs. Traditional Marketing

When approaching marketing budget allocation for digital versus traditional efforts, don’t think about what most companies are doing. Think about your audience. Where are they consuming media the most? What ad mediums have performed well in the past? Finally, evaluate what happens next; in most cases, digital marketing puts users in a position to convert immediately and generates valuable insights.

2. Look at ROI and CLV by Channel

B2C businesses spend more on marketing to succeed – especially service businesses. B2B businesses tend to find easier success through word-of-mouth and referrals. Which channels (e.g., organic search, referrals, paid media, social, email …) are most valuable to your business?

You know which channels produce the most conversions, like lead forms and calls. You likely know your usual lead-to-sale rate. The next step is determining the ROI for each marketing channel. For example, check out how we calculate the ROI of our SEO services. Make marketing cost analysis a part of your quarterly internal reporting and adjust as needed.

Finally, never ignore customer lifetime value (CLV) when determining digital marketing budget allocation. While B2B marketing budget allocation matters, too. The less you spend on marketing, the more every dollar has to do. So, you want to make sure your analytics deliver trustworthy metrics that inform smart decisions.

3. Set a Maximum Budget and Tweak It as Needed

It’s better to overestimate than to underestimate marketing spend. If you set a maximum budget for digital marketing and traditional marketing, you can adjust spend based on performance. However, avoid being too reactive. Some tactics, such as SEO, pay for themselves after a seemingly slow start.

Setting a maximum budget is also helpful if you don’t have much historical marketing and sales data to work with.

Two Traditional Marketing Budget Allocation Tips

Traditional marketing budgets include several effective tactics. Event marketing, print and over-the-air (OTA) media still pack real power, but it can be very challenging to measure return on investment accurately.

1. Give Traditional a Chance

In some industries, the consensus is that traditional media is dying. Even though our agency is focused on digital, we don’t believe in leaving traditional marketing in the dust. As this Gartner report mentions, many companies are still finding good reasons to allocate about 25% of their marketing budget to traditional media. If your unique audience is consuming specific media, it’s worth testing the waters there.

2. Rely on Brand Awareness for ROI Signals

It’s difficult to measure the ROI of traditional marketing like radio, print and outdoor advertising because the initial brand impression is not always trackable. You mitigate that lack of data with a little coordination, such as using custom URLs in your print, radio and podcast ads or QR codes to make attribution easier. You might need to focus on signals of increased brand awareness to determine the value of traditional marketing. Check out our guide to measuring brand awareness.

If better brand awareness isn’t enough to make you confident in your traditional marketing budget, consider market research (e.g., surveys) to find out how often people are finding your brand through traditional media.

Include Vendors in Your Marketing Budget Plan?

Before you finalize your marketing budget plan, assess your current marketing team’s structure. Do you have vendors supporting strategy and execution? If so, chat with them about any upcoming contract changes. In many cases, the cost of digital marketing services is less than adding another internal employee.

Get the Numbers Right: With Help from Oneupweb

When you’re working with the right digital marketing agency, costs are quickly offset by measurable results. When you choose Oneupweb, we’ll help you create a budget, measure results and keep your business growing.

Make the most of your marketing budget with an experienced, passionate team of marketers with a knack for solving problems. Let’s get started; reach out to us online or call (231) 922-9977.