Marketing Budget Breakdown
Take the guesswork out of your marketing budget allocation with an in-depth look at the real cost of digital marketing. You’ve got to spend money to make money, but what’s the best way to set (and stick to!) a dedicated budget?
Grab your TI-89 calculator and let’s dive into your marketing budget breakdown!
What Percentage of Revenue Should a Company Spend on Marketing?
One of the traditional ways to establish a marketing budget is to base advertising expenses on a percentage of company revenue. A lot of companies stick to this maxim to generate a dynamic 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 marketing, and as much as 75% of that marketing budget goes to digital. However, the average marketing budget is influenced by industry, audience, cash flow and more.
There’s no magic marketing budget based on a percentage of revenue or sales, but revenue is a great place to start. Many of the recommendations are based on the Gartner survey mentioned, plus 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, the below 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!
- Spend about 5 – 6% of your total budget on each of the following that applies to you:
- 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.)
- 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:
- Analytics tools and services (customer behavior, website performance, etc.)
- Spend the most (about 8 – 15%) on these, as they apply:
- Paid search and display advertising
- Ecommerce technology and services
Digital Marketing Budget Allocation Tips
Finish off your advertising budget by comparing the cost of digital marketing with traditional marketing channels. Then, evaluate the cost-effectiveness of digital marketing itself by focusing on a few core platforms.
Let’s get into it!
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 surely 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. These numbers will help you create your marketing budget with more confidence, plus get internal buy-in on the plan.
Finally, never ignore customer lifetime value (CLV) when determining digital marketing budget allocation.
3. Set a Maximum Budget, and Tweak 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 historic marketing and sales data to work with.
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 marketing 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, cost is quickly offset by measurable results. 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.