As we near the entrance of a 2022, your thoughts might turn to your marketing budget. Now that the economy is getting in better shape, you may wonder how you should spend marketing.
There’s a lot of nuance to this topic, but we’ll try to address all of those in this article.
How Much Should You Spend on Marketing?
Frankly, there isn’t a solid answer to how much you should spend on marketing. A company’s budget is dependent on a variety of factors like industry, annual revenue, and goals. But even if there isn’t a one-size-fits-all strategy, the good news is, we’ve dug up useful industry statistics that can guide you on establishing the right budget.
This guide will cover all of the latest findings on marketing budgets and spending across revenues, industries, and channels. Use these tips to help you make smart decisions and grow in 2022.
We’ve also created an amazing digital marketing calculator that will help you establish the right budget according to your industry, annual revenue, and desired growth.
Table of Contents
Align Your Marketing Budget with Your Goals & Strategies
Putting together a marketing budget requires thinking through your business goals first. That way, you can productively identify the strategies and tools required to make those goals a reality.
Let’s say your goal is to generate more traffic and engagement on your site for an upcoming product launch. This might require strategies like ad retargeting, SEO, and hiring freelance writers to create content.
Your team can then discuss specifics such as:
- How wide of an audience you’re attempting to reach
- How many paid platforms you’re looking to use
- Whether you’re looking to target people based on users’ interest or keywords (the broader the category, the larger the audience and budget)
- The types and the number of content (blog posts, infographics, videos, display ads, etc.) you’re looking to create
- How many writers/contractors you’ll need to hire and how much you’ll pay them (will their pay be based on word count or will it be on a per-project basis?)
Build Flexible and Adaptive Plans
As you’re discussing and planning out your goals, it’s vital to ensure your strategies are adaptable. COVID-19 reminded us that volatility will always exist, and industries will always change.
Forty-four percent of CMOs have faced mid-year budget cuts due to COVID-19, and 11% expect their budgets to face significant cuts of more than 15%.
Building flexible strategies is pivotal to safeguarding the long-term viability of your business. So take a more agile approach to your marketing strategies by considering:
- Activity/performance: Let’s say you’ve invested a large portion of your budget towards paid marketing initiatives. But months after your campaign launch, your team discovers organic efforts are bringing in the most growth. You want to be able to shift your priorities accordingly and move money into your most profitable resources.
- Unforeseen changes in the marketplace: Your team should quickly respond to these shifts. Say your competitor lowers their prices. You’ll either need to decrease your prices as well or shift your marketing messages and channels to stay competitive.
- Unexpected shifts in the digital economy: Today’s latest marketing trend can quickly become tomorrow’s standard. Is your business ready and willing to adapt? Do you have the tools you need to keep your company visible and relevant?
By meticulously planning out and prioritizing your marketing strategies, you can then put together an effective and goal-oriented budget.
Marketing Budget per Company Size/Annual Revenue
As a general rule of thumb, companies should allocate between five to 15% of their total gross revenue to marketing to maintain their current position in the industry.
Most recently, in June 2020, U.S. marketers expressed they were investing an average of 11.4% of their business revenues into marketing. Of course, choosing the right percentage depends on what you’re looking to gain for the quarter or year.
If your business is looking to grow or gain greater market share, analyze the ways you’ve spent your money in the past. Maybe there are more efficient ways your team can utilize your marketing budget, or maybe you need to budget a higher percentage on that five to 15% scale (or even go beyond it if you already meet the threshold). A larger investment can help you harness the right tools to connect with your target market and generate more revenue.
One of the first steps in figuring out your marketing budget is looking into your company’s gross or estimated revenue. Let’s take a look at marketing budgets for small businesses.
According to the U.S. Small Business Administration, small businesses, or businesses with revenues under five million, should allocate seven to eight percent of their revenues to marketing. This percentage assumes you have a profit margin of 10 to 12%.
But if you’re a new and small company that’s been running for one to five years, you should allot a higher percentage—about 12 to 20% of your gross revenue.
We know, that’s a rather heavy investment. But think about it—the world doesn’t know about your products/services yet. By generously investing in marketing initiatives, you can spread the word and spread it well so you’re targeting the right people and establishing your brand.
Of course, don’t sacrifice too much money where you’re putting your business in jeopardy. Once your company has gained solid traction in the industry, you can regroup with your team on possible ways to bring down your marketing budget. With better results, you can start spending smarter.
So what about medium- to large-sized companies?
In their 2019-2020 CMO Spend Survey, Gartner surveyed 342 marketing executives at organizations with $500 million to $20 billion+ in annual revenue. Gartner discovered these marketers have spent, on average, 10.5% of their revenue on marketing.
This was a slight dip from the year prior, which was at 11.2%. The decrease involves a variety of budgetary challenges due to executive/CEO decisions and changes in the business environment.
Among these medium/large companies, Gartner found:
- B2B Services companies allocated 10% of their revenue.
- B2B Manufacturing companies allocated 10.4% of their revenue.
- B2C Direct Sales companies allocated 10.4% of their revenue.
- B2C Indirect Sales companies allocated 10.9% of their revenue.
- An even mix of B2B and B2C companies allocated 10.9% of their revenue.
Almost two-thirds, or 61%, of CMOs were confident their marketing budgets would increase in 2020. According to the 2019 CMO Survey’s Highlights & Insights Report, marketing spend was expected to grow by 8.7%.
All Businesses with Varying Revenues
The Highlight and Insights Report surveyed marketers from companies that held various sales revenues (the scale was anywhere from less than $25 million to more than $100 billion).
This is what they discovered:
- B2B Product companies allotted 8.6% of their revenue.
- B2B Services companies allotted 8.7% of their revenue.
- B2C Product companies allotted 9.8% of their revenue.
- B2C Services companies allotted 15.6% of their revenue.
Marketing Budgets per Industry
As illustrated above, the highest percentage of marketing spend tends to come from B2C companies. But how do the numbers/percentages look when you break them down by specific industries? Here are some guiding facts.
Marketing Budget as a Percentage of Overall Company Budget
A survey of 427 senior marketers at U.S. for-profit companies (both B2C and B2B firms) collected marketing spend across industries. The following percentages reflect how much you should spend on marketing per industry when compared to the overall company budget:
- Consumer packaged goods: 24%
- Consumer services: 15%
- Tech Software/biotech: 15%
- Communications/media: 13%
- Mining/construction: 13%
- Service consulting: 12%
- Education: 11%
- Healthcare/pharmaceuticals: 10%
- Retail wholesale: 10%
- Banking/finance/insurance: 8.0%
- Transportation: 8.0%
- Manufacturing: 8.0%
- Energy: 4.0%
Marketing Spend as Percentage of Company Revenue
Below shows how much marketers have spent on their initiatives. The percentages reflect marketing spend out of total company revenue:
- Consumer services: 18.9%
- Education: 12%
- Tech/software/biotech: 9.7%
- Banking/finance/insurance: 9.2%
- Consumer packaged goods: 9.1%
- Communications/media: 9.0%
- Healthcare: 9.0%
- Transportation: 8.5%
- Energy: 8.3%
- Service consulting: 7.5%
- Retail/wholesale: 4.4%
- Mining/construction: 3.0%
- Manufacturing: 2.4%
As you use these statistics to help plan your budget, keep in mind not all companies are the same in what they include in their marketing budget. For example, some companies include sales and marketing training expenses as part of their marketing budget, whereas other companies might be more inclined to add them to another budget.
How to Spend Your Marketing Budget
Now that you have a rough idea of how much of your company’s budget you should allocate towards marketing, it’s time to consider how to spend a marketing budget.
As you probably know, there are many different ways to market your business, and each method comes with unique benefits. To start, marketing budgets generally involve two types of marketing:
- Traditional marketing: This would involve traditional methods/tools to market your business like print, TV, and radio ads along with tradeshows and direct mail.
- Digital/online marketing: This involves digital methods/tools you use to connect with your audience. These online initiatives can be centered around your website, social media platforms, paid display ads, SEO strategy, and more. You might consider spending at least half of your marketing budget on digital channels.
In 2020, the average company was expected to budget 45% of their total marketing budget “to online” or digital marketing. Digital marketing has been on the rise. Generally, marketers have reduced their budgets for traditional advertising and increased their digital marketing funding.
Not to mention, the CMO Highlights & Insights report found companies tend to prioritize print, search engine optimization (SEO), and other paid digital media (this includes trade shows and partnerships) among paid media options. Companies with sales of 10% and over from online initiatives reported to have increased their marketing spending by 13.6%.
But keep in mind this all depends on your target market. What do they find valuable and where are they hanging out? Stay centered on the buyers’ journey and divide up your budget accordingly.
Industry Statistics across Marketing Channels/Services – All Company Sizes
Let’s take a look at some industry statistics. Criteo surveyed 901 marketers around the world to discover how they’re dividing their budget across different marketing services.
Here’s what they found:
Paid display (41% was focused on retargeting): 16%
According to Critero, only 10% of customers purchase products from the first website they visit. Consideration campaigns and awareness ads have become central to the customer journey. These methods help introduce potential customers to your brand and compel them to visit your site.
Gartner’s 2018-2019 CMO Spend Survey noted awareness to be the top metric compared to ROI, customer value, and customer satisfaction. Personalization was found to be a key strategic marketing capability as well. CMOs spend about 14.2% of their budget on personalization efforts.
Social media marketing: 14%
As many people spend several hours a day on social platforms, there are numerous opportunities for businesses to use ads and connect with their consumers.
Per eMarketer, Facebook has become the largest seller of digital advertising behind Google. In 2019, Facebook generated $67.37 billion in net ad revenues. Compare this with Twitter, which made $2.97 billion.
Traditional marketing: 13%
Criteo noticed that traditional media is still a necessary tool for marketers, even though digital accounts for nearly half of ad/marketing spending worldwide. TV specifically gets most of the traditional marketing dollars and the rest is evenly distributed across newspapers, magazines, and radio.
Email marketing: 10%
Fifty-nine percent of marketers say they receive the most ROI from email marketing. Not to mention, 21% of consumers feel email marketing from retailers and brands has become more influential on their purchase decisions over the last two years.
If your team decides to invest in email marketing, consider focusing your email efforts on mobile. Litmus research shows mobile carries more email opens than desktop.
Content marketing: 10%
Blogging, long-form, and video content are popular and useful content marketing tactics. Seventy percent of marketers invest in content marketing, with video being the most popular.
And the next rising trend? Voice search. Canalys research illustrates that global smart speaker market share grew by 55.4% in 2019. Optimizing your content for voice search means winning featured snippets and building more Q&A or conversational-type content.
Sixty-four percent of marketers invest time in SEO. Moreover, 75% of online users don’t scroll past the first page of search results.
SEO provides organic and free traffic. With content and a site that includes SEO, your company can become more visible online and drive traffic and engagement.
Paid search advertising: 9%
Also referred to as pay-per-click (PPC) or search engine marketing (SEM), paid search involves adding in key terms you want your ads to show up for. These ads often show up at the top of search results.
Paid search provides specific targeting, making it easy to discover niche audiences, and you can use retargeting to boost conversions. Consider combining both SEO and PPC. SEO can help your business deliver great content, and PPC can help you spread your content to the right audience.
Landing page/website: 9%
It’s important to continuously improve the user experience, or your conversion rate optimization (CRO). That way, you can maximize your website performance and win more leads and customers. With A/B testing, you can test out specific components of your site like headers, CTAs, and long/short landing pages to see what performs best.
Affiliate marketing: 9%
Working with influencers and key partners to promote products/services has become a popular way to drive brand awareness and conversions. More than 80% of brands have affiliate programs.
Affiliate marketing can also include co-marketing (when two businesses with similar consumers promote together) or discount offers (using prominent and reputable coupon sites to draw traffic).
Industry Statistics across Marketing Channels/Services – Medium/Large Companies
In the 2019-2020 CMO Spend Survey, 342 marketers from companies with annual revenues of $500 million to $20 billion+ distributed their budget across channels as such:
- Website (this includes design and UX-related expenses): 11.7%
- Digital commerce: 10.9%
- Mobile marketing: 10.2%
- Social marketing: 10.1%
- Digital advertising: 8.9%
- Email marketing: 8.2%
- Offline advertising (this includes print, radio, out-of-home media such as billboards, floor display, and direct mail): 7.4%
- TV advertising: 7.0%
- SEO: 6.6%
- Paid search: 6.6%
- Event marketing (face-to-face): 6.5%
- Channel/affiliate marketing: 5.9%
Shifts in Strategies Amid COVID-19
Remember that with sudden economic downturns or changes in the industry, your team may need to move around your priorities. For example, because of COVID-19, many marketers have shifted their focus to online/digital efforts.
Here are some of the biggest changes:
- Webinars have increased by 67%.
- Organic social has increased by 56%.
- Online video has increased by 44%.
- Events/experiential has decreased by 80%.
- Out-of-home advertising has decreased by 39%.
- TV has decreased by 33%.
As we mentioned earlier, it’s essential to have flexible and adaptive plans. Investing in more online channels may help give you the extra boost you need to consistently stay connected with your consumers.
Track, Measure, and Revise
Once you have your goals and budget laid out with your team, it’s important to consistently track and measure key metrics. You need to gain insight into how successful your marketing efforts actually are to make the most of your budget.
If your team finds that one quarter was more profitable than the next, investigate why. Use these key points to drive better marketing tactics.
Here are a few key analytics tools your team can use:
- Google Analytics: This free tool gives you an overview of your inbound website traffic, engagement, bounce rates, and conversions. You can also integrate AdWords to measure the performance of your PPC campaigns.
- Hubspot: Hubspot allows you to track key metrics for your marketing, sales, and customer success campaigns. From an integrated customer relationship management (CRM) system to measuring your call-to-actions (CTAs), you can draw valuable insights from your customers and simplify communication between you and your leads.
- BuzzSumo: Buzzsumo helps you track the number of blog shares on your social platforms and analyze the performance of competing content in your industry. This tool can also help you gain insight into variables like content length, publish date, and headline type.
- Facebook Insights: This tool allows you to track your Facebook marketing campaigns, the content you post, and the performance of your Facebook ads.
Plan Right with a Trusted Team—Contact Us
We know—planning a marketing budget is a lot to take in. But you don’t have to do it alone. It’s best to consult your plan with a trusted team of digital marketers who can set you up for success. Big Leap can be this team.
With over a decade of experience in the digital marketing world, our team will take the time to learn more about your business and help you design a comprehensive marketing strategy and budget. So contact us today, and we’ll get you started with a free consultation.