The Ultimate Marketing Budget Breakdown

You’ve got to spend money to make money, but what’s the best way to set (and stick to) a dedicated marketing budget? There are several ways to calculate how much to spend on marketing, each influenced by factors as diverse as the age of your company, industry, and broader macroeconomic conditions. 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:

Determining How Much to Spend on Marketing

There are many things to consider when creating a marketing budget. First, it’s smart to determine what you can afford to spend on marketing by looking at how much money is coming in.

Set Your Marketing Budget as a Percentage of Revenue

One of the traditional ways to establish a marketing budget is to base it on a set percentage of company revenue. This allows companies to generate an annual marketing budget that reflects changing company growth or challenges.

What percentage of revenue should your company spend on marketing?

A Gartner CMO survey found that publicly traded companies spend about 11% of total revenue on marketing, with as much as 75% of that budget going to digital. While there is an average, there is no “typical” marketing budget. Marketing spend varies based on industry, geographic market, size, and other factors. Think of revenue as a starting point, not a ready-made answer.

Many of the recommendations here are based on the Gartner survey mentioned, plus our additional research.

Average Marketing Budget by Industry

Once you have a feel for your revenue, compare your allocated marketing budget with industry peers. In the table below, you’ll note that some industries, like energy and other commodities, spend little on marketing. Companies with high-friction services don’t invest a lot in marketing (it’s hard to leave your utility company or bank, although that’s getting easier, but easy to shop at a different clothing store or swap in-store with online shopping).

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 Consideration for Your Budget: Your Brand’s Age

Established brands can spend less on marketing, while start-ups need to invest in brand awareness and capture market share. In many ways, marketing spend aligns with overall business growth, and new companies have considerably more room to grow than legacy brands. What type of growth would benefit your business?

High-growth (Startup)

Newer, 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 invest between 15-30% of gross revenue, or roughly twice as much as their well-known peers. 

Moderate growth

Think of moderate growth companies as established but small. These companies are usually looking to grow through mergers and acquisitions or by capturing additional market share. Mid-stage companies typically spend 12%-20% on marketing, or about $450,000 for a brand earning $2 million in revenue annually.

Stable growth

Large, enterprise-scale businesses with stable growth have more funds available to spend on marketing. These businesses often invest some of their budget into tools or processes that increase marketing efficiency to maximize their results and lower marketing costs over time. Large organizations typically spend 2%-10% of annual revenue, though average spend increased nearly 3% during the stimulus-fueled pandemic era of 2021-2022.

With some industry benchmarks in mind, you’ll need to determine where to toss your budget.

What Are Normal Marketing Expenses?

When creating your budget, make sure you’re accounting for everything related to marketing, which may include more costs than you think. Tracking these sometimes overlooked marketing expenses will help you more accurately calculate your return on investment and keep your accountant happy.

The average marketing budget includes a slew of costs beyond deliverables, including:

• Software and reporting tool subscriptions
• Travel, fees, and expenses for tradeshow attendance
• Outside vendors and agencies (hey, hi!)
• Training
• Marketing department salaries and benefits
• Stock photography licensing

Don’t forget to set aside some cash to sponsor the local little league team or non-profit 5k run within your marketing expenses rather than exceeding your budget out of the kindness of your heart!

How to Allocate Marketing Budget Effectively

Set your marketing goals and determine strategies and channels that will help you achieve those goals. This is one of the first steps to decide where budget will be allocated and prioritized.

Follow these three steps to help you decide priority channels and the budget you need to achieve your marketing goals.

1. Digital Marketing vs. Traditional Marketing

Compare the cost of digital marketing with traditional marketing channels. Traditional marketing includes direct mail, billboards, newspaper ads, and more. After comparing the cost, evaluate your marketing return on investment (ROI) by comparing efficiencies across marketing budget categories.

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 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. Traditional marketing can be beneficial for growing your brand presence and audience.

2. Look at ROI and Customer Lifetime Value (CLV) by Channel

B2C businesses spend more on marketing to succeed – especially service businesses which often rely on organic marketing and paid media. 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? Follow these steps to determine important channels:

• First, consider which channels produce the most conversions, like lead forms and calls.
• Next, determine the ROI for each marketing channel. For example, check out how we calculate the ROI of our SEO services. To make informed decisions, make marketing cost analysis a part of your quarterly internal reporting and adjust as needed.
• Finally, never ignore CLV when determining digital marketing budget allocation. While B2B marketing budget allocation matters, too. The less you spend on marketing, the more every dollar must 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. This is helpful if you don’t have much historical marketing and sales data to work with. Avoid being too reactive. It’s important to give strategies time to reach their full potential. Some tactics, such as SEO, pay for themselves after a seemingly slow start.

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.

A Simple Marketing Budget Allocation Example

Once you know how much to spend on marketing, you can choose where to allocate dollars. There are many strategies to consider. Depending on your values and goals the best strategy for you may not even be strictly financial or results driven.

Sample Marketing Budget Allocation

Our sample company wants to prioritize their organic content marketing, technical site health, and paid search next year. They are allocating a percentage of their budget to each channel and priority item. You’ll notice the estimated percentages don’t add up to 100%; that’s because it’s important to allocate additional funds to costs beyond deliverables.

Content Marketing Channels

Spend about 30 – 40% of your total revenue on the content marketing channels that make the most sense for you, including:

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

Technical Health

Spend a little less (about 10 – 20%) on each of the following technical elements that applies: 

• Website development maintenance
• Market research
• Analytics tools and services

If your business depends heavily on your website (think ecommerce businesses), this line item may be more than 20%.

Paid Channels

Spend a bit on paid channels, balancing brand awareness and conversion-focused campaigns. Reserve around 15-25% of marketing budget for:

• Paid search and display advertising
• Sponsored content in industry publications

Use these guidelines as a 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!

What To Do When Budgets Are Down

Whether organizational priorities have shifted or the macroeconomic environment has slowed, marketing budgets sometimes shrink. Use the tips above to sharpen your marketing strategy and reduce spend on underperforming channels. You should also hold the line; in the words of Rahm Emmanuel, “Never let a crisis go to waste,” and maintain spend in channels performing well to capture marketing share for when market conditions improve.

When Do Companies Have Marketing Budgets Set for Next Year?

Most companies set marketing budgets before the start of their fiscal year. We typically schedule annual planning discussions before or alongside our client’s end-of-year strategy meetings to support marketing decisions and prioritize their most effective efforts. We can help you prepare for your planning sessions with market research or in-depth marketing audits.

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. Choose Oneupweb and 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; contact the team or call (231) 922-9977.