Another year is coming to a close, which means you’re probably mulling over next year’s marketing budget—how much should you spend on marketing?
We know you’d like us to give you a definite answer, but a company’s budget depends on a number of factors like its industry, annual revenue, and goals. We’ve created a handy-dandy digital marketing budget calculator that helps establish the right budget according to your inputs.
But to help you out in determining your “magic” number, we also want to give you plenty of useful industry stats. Here you’ll find up-to-date findings on marketing budgets, applicable to different industries and channels. Read them, ponder what they mean, and apply the knowledge to serve your business this upcoming year.
Align Your Marketing Budget with Your Goals & Strategies
Creating a marketing budget requires deep consideration of your business goals. That’s the only way to productively identify the strategies and tools required to make those goals come to pass.
Let’s say what you want most is to generate higher traffic and engagement on your site for a new service launch. This requires strategies such as ad retargeting, SEO, and hiring freelance writers to create content.
Now it’s time to move on to specifics:
- How wide of an audience do you need to reach?
- How many paid ad platforms you’re looking to utlize?
- Are you trying to target people based on interests? Keywords? (Just realize that the broader the scope, the bigger the budget.)
- What types of content (blog posts, infographics, videos, display ads, etc.) do you need created?
- How many contractors and writers will you need to hire and how much can you pay them?
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 volatility will always exist, and industries will always change.
For example, the mean percentages of marketing budgets during the last few years are as follows (% is a reflection of a company’s revenue):
- 2018: 11.2%
- 2019: 10.9%
- 2020: 11.0%
- When COVID-19 began, 44% of CMOs faced mid-year budget cuts; 11% expected their budgets to face significant cuts of more than 15%.
- 2021: 6.4%
- 2022: 9.5% (still below pre-pandemic spending)
The future is never certain. Therefore, building flexible strategies is pivotal to safeguarding the long-term viability of your business. 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 to keep your company visible and relevant?
By meticulously planning and prioritizing your marketing strategies, you can create an effective and goal-oriented budget.
Marketing Budget per Company Size/Annual Revenue
As a general rule of thumb, companies should allocate between 5 and 15% of their total gross revenue to marketing to maintain their current position in the industry.
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 5 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 7 to 8% of their revenues to marketing. This percentage assumes you have a net 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 allow 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.
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. Of course, don’t sacrifice money to the point that you put your business in jeopardy.
In their 2022 CMO Spend Survey, Gartner surveyed 405 marketing executives at organizations with more than $1 billion in annual revenue. Again, these marketers have spent, on average, 9.5% of their revenue on marketing. This is a significant increase from the prior year, which was 6.4%.
This growth 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.
All Businesses with Varying Revenues
The latest CMO Survey’s Highlights & Insights Report surveyed 2,592 marketers from companies that held various sales revenues (the scale was anywhere from less than $10 million to more than $50 billion).
This is what they discovered:
- B2B Product companies allotted 9.4% of their revenue.
- B2B Services companies allotted 10.0% of their revenue.
- B2C Product companies allotted 14.2% of their revenue.
- B2C Services companies allotted 8.7% 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 2016 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%
- Transportation: 8%
- Manufacturing: 8%
- Energy: 4%
Marketing Spend as Percentage of Company Revenue
Marketing spend has increased across the majority of industries. The percentages below reflect marketing spend out of total company revenue:
- Consumer products: 8.0%
- Financial services: 10.4%
- Healthcare: 9.7%
- Retail: 9.1%
- Travel and hospitality: 8.4%
- Media: 10.1%
- MFG: 9.8%
- IT and business services: 9.6%
- Tech products: 10.1%
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.
Marketing Budget per Channel/Service
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 with, marketing budgets generally involve two types of marketing:
- Traditional/offline 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.
Gartner and Statista both report traditional/offline channels have rebounded in 2022. Traditional media spending grew by 2.9%. Still, digital media reigns, as marketers have grown their online spending by 16.2%, accounting for 56% of marketing spend.
The CMO Highlights & Insights Report found that, with paid media, companies tend to prioritize print, search engine optimization (SEO), and other paid digital media, including trade shows and partnerships.
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 marketing funnel 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 budgets across different marketing services.
Here’s what they found:
Paid display (41% was focused on retargeting): 16%
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 notes 50.1% of marketers’ budget is spent on brand awareness and engagement. Personalization was found to be a key strategic marketing capability as well. Personalization efforts account for about 14.2% of spending in CMOs’ budgets.
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 over half of ad/marketing spending worldwide.
TV specifically gets most of the traditional marketing dollars (primarily in the B2C industry), and the rest is evenly distributed across newspapers, magazines, and radio. B2B industries outspend B2C when allocating their offline budget towards events (21.9% vs. 16.4%).
Email marketing: 10%
Fifty-nine percent of marketers say they receive the most ROI from email marketing, “$36 for every dollar spent,” according to Litmus research. Not to mention, 59% of consumers believe marketing emails influence their purchase decisions.
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 valuable content marketing tactics.
- 70% of marketers invest in content marketing, with video being the most popular.
- Companies using content marketing earn six times more conversions than their counterparts.
- When information technology and services company CORE recently revamped content with high-quality landing pages and blog posts, the business reached a 1,431% boost in site impressions.
The next rising content marketing trend? Interactive content. More specifically, virtual reality (VR). VR allows your customers to experience immersive simulations. They can see how your products might look in their everyday life.
One prime example is the virtual showroom Michaels launched on Pinterest, which earned the business an 8% increase in in-store traffic.
Sixty-four percent of marketers invest time in SEO. When 75% of online users don’t scroll beyond the first search results page, online visibility is a must. And SEO helps you achieve this.
SEO provides organic and free traffic. With content and a site rich with SEO best practices, your company can become more visible online and drive traffic and engagement.
Check out how HVAC business OyBoy Heating and Cooling leveraged SEO and won a:
- 95.4% increase in organic traffic
- 990.9% more new visitors
Paid 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.
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. Paid search provides specific targeting, making it easy to discover niche audiences, and you can use retargeting to boost conversions.
When financial lead generation company Round Sky paired these two strategies, it earned a:
Landing page/website: 9%
It’s vital 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 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 Gartners’ 2022 CMO Spend Survey, 405 marketers at medium/large companies distributed their budget across channels as such:
- SEO: 8.5%
- Email marketing: 7.8%
- Content marketing: 7.8%
- Social media: 7.6%
- SMS/in-app advertising: 6.9%
- Social advertising: 10.1%
- Search advertising: 9.8%
- Digital display advertising: 9.3%
- Digital video advertising: 8.8%
- Partner/affiliate/co-op on digital channels: 8.1%
- Digital audio advertising: 8.1%
- Digital out of home: 7.4%
Shifts in Strategies amid Inflation/Recession
Remember that your team may need to move around your priorities with sudden economic downturns or changes in the industry. For example, when we conducted a quick survey about shifts in marketing strategies in light of inflation/recession indications, here’s how professionals responded:
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 calls-to-action (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 Audience 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
All things considered, planning and executing a marketing budget can be a bit overwhelming—fifty-eight percent of CMOs lack in-house capabilities to deliver their strategies. To avoid wasting money on meager results, consult with a trusted team of experienced digital marketers who can guide you to success.
With more than a decade of experience in the digital marketing world, Big Leap knows what it takes to truly understand your business and its goals. If you want help designing a comprehensive marketing strategy and budget, let’s chat. Contact us and we’ll get started right away so you can hit the ground running come January.