How Much Should You Be Spending On Marketing?

The best thing is that your costs are basically limited to financing the production of the video. This method is typically utilized by startups and companies who do not have enough revenue to support a large advertising budget. One of the most important business tools of the 21st century is your company’s website. You will likely include your web address on any creative elements, so you want to be sure consumers are being directed to a functioning and informative page. Once you have a solid website in place, search engine optimization efforts will help maintain that foundation and grow your authority as an expert in your field. While building a website can be an expensive endeavor, investing in a solid foundation will only benefit other marketing initiatives later.

These pay-per-conversion methods, such as promoted posts and sponsored content, have low minimum spends and high conversion rates. Across all sectors, digital marketing budgets have increased consistently, while traditional channels have lost ground. However, there are occasional pockets of growth in traditional marketing, such as the one positive growth area for B2B Product industries, as shown below from the February 2020 chart. By interpolating a brand’s market share into the curve, a marketer can ascertain the share of voice for all brands of that size.

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The August 2019 CMO Survey had shown planned spending on marketing training and development reaching a 5 year high, with 5.8% of marketing budgets dedicated to training and development. The special June 2020 edition of the CMO Survey showed the strong focus brands were putting on customer experience during this difficult year. Companies had adjusted their investment in customer experience to 16.7% of marketing budget, up from 15.2% in the February 2020 survey. Marketers expected the number to grow to 20.6% in the next three years. Marketing budgets as a percent of the overall firm budget has remained fairly steady over the past several years, as shown in the chart below. Consistent with the increase in marketing budgets overall, marketing budgets as a percentage of firm budgets was projected to reach 11.3% in 2020 according to the February 2020 CMO Survey. Advertising is only part of a larger promotional mix that also includes publicity, sales promotion, and personal selling.

Advertising Budget

Or more according to their market share trends, I came up with the findings shown in the last table. The average very popular brand with a rising sales trend is profit taking. But there are signs that greater underinvestment imperils sales, and if the underinvestment opens out to 4 percentage points for the average brand, sales will turn into a decline.

Marketing & Digital Budget Summary

To create a successful budget, it is important to understand how much money to reserve for advertising and what combination of campaigns will meet both that number and your business goals. Quantifying an advertising campaign’s impact on a company’s operating income is critical to understanding the relationship between advertising expenditure and revenue generation. A cost-benefit analysis is commonly conducted to assess the net financial benefit of a project undertaken. Content marketing such as social media or blog posts may not produce an immediate revenue bump, but rather build relationships with customers and set the stage for future revenue.

If you’re seeing a positive ROI on a given strategy, that’s a good thing—but chances are, there’s another strategy out there that can give you an even higher ROI. For that reason, it’s vital that you’re willing to keep experimenting.

What’s The Ideal Marketing Budget?

The chart below, from a CMO Survey in a past year, shows how much marketing budget as a percent of total revenue can vary by industry. Since 2009, marketing budgets remained relatively consistent or increased compared to the previous year for the majority of participants. • Barter—Some businesses may be able to offer products and services in return for reduced advertising rates.

Online advertising is an umbrella term that refers to search engine marketing, retargeting ads, targeted video ads, and display advertising. These marketing methods are a great way to increase conversions because of the ability to track analytics and optimize online campaigns as they run. The longer your campaign runs, the harder your budget is working for you. However, the low minimum requirement of these types of campaigns lends themselves to supplementing other methods as well as running by themselves.

  • You can use marketing to promote your brand, products and services to a new and bigger audience.
  • • Mail order discounts—Many magazines will offer significant discounts to businesses that use mail order advertising.
  • The first step toward marketing budget allocation is determining your marketing goals for the year.
  • A special survey was conducted in June 2020, gathering information on how the pandemic was impacting marketing plans.
  • Well, the company intends to attract the audiences towards their brand name by way of advertisement.

If you do not have a site, or your site is not functional, this should be the first part of your budget. An advertising budget is a company’s allocation of promotional expenditures over a specified time period. It is a measure of a company’s planned expenditure on accomplishing marketing objectives. The advertising budget is where a company’s strategic marketing objectives and cost-benefit analysis converge in its operational plans. Social media advertising investments will continue to grow, with a 17% compound annual growth rate from 2016 to 2021. Social media spending overall averaged 13% of total marketing budget in the February 2020 CMO Survey, marking the second-highest point in their survey history. The first is the heavy advertising infusions, exceeding their market share percentages, given to new, burgeoning brands .

Expected Changes In Social Media Platform Investments

• Continuity—This type of scheduling spreads advertising at a steady level over the entire planning period , and is most often used when demand for a product is relatively even. Who is interested in purchasing the product or service, and what are the specific demographics of this consumer (age, employment, sex, attitudes, etc.)? Often it is useful to compose a consumer profile to give the abstract idea of a “target consumer” a face and a personality that can then be used to shape the advertising message. We work alongside everyone from family businesses to the Leading Caterers of America and partner with organizations like the ICA, LCA and Catersource. If the owner of this website was investing $1,000 a month in online advertising, their cost to acquire each customer would be $100. If the owner of this website was investing $1,000 a month in online advertising, their cost to acquire each customer would be $2,000.

So if you plan to dedicate five percent of your revenues and you expect to bring in $100,000 in sales that year, you would spend $5,000 on advertising. Answering these questions will help to define the market conditions that are anticipated and identify specific goals the company wishes to reach with an advertising campaign. Once this analysis of the market situation is complete, a business must decide how best to budget for the task and how best to allocate budgeted funds. With goals set and a strong marketing foundation , you’re ready to select marketing activities. You will likely have to exceed your 5% marketing budget to update your website once every three to five years. Thus, the marketing foundation costs are not typically included in your 5%. Years that require more spending will arise whenever you need to invest in the foundation for all of your day-to-day marketing activities.


When calculating ROI for these types of promotions, consider factors other than revenue, such as additional followers, page views, re-blogs and re-tweets. Returns-on-investment in the realm of ecommerce are about more than money — virality is one of the Internet’s most prized currencies. As you execute marketing campaigns, you need a concrete way to determine what worked and what did not.

  • Marketing is rarely as straightforward as the above example, however.
  • If the owner of this website was investing $1,000 a month in online advertising, their cost to acquire each customer would be $100.
  • If your budget includes hiring a PPC consultant, you’ll need to spend the time to educate them on your business’s goals and priorities.
  • A promotional mix, like a media mix, is necessary to reach as much of the target audience as possible.
  • The threshold level of underinvestment for this brand is therefore 5 percentage points below its market share.
  • There are obviously some erratic exceptions, and nothing can be done to allow for these.

It is important to note that these percentages represent the total marketing investment, not just advertising or media spend. Investment in paid search, display advertising, social media advertising, online video advertising and email marketing is predicted to account for 46% of all advertising by 2021. The February 2020 CMO survey indicated that marketing budgets were expected to grow by 7.6% in the next year, reflecting a slight dip in growth but remaining on an upward trajectory. • Search engine optimization — Search engine optimization is fast becoming a must-have body of knowledge for business owners.

How To Spend Your Marketing Budget

Yet many online business owners believe that marketing begins and ends with their social media feeds. Word of mouth and community are great ways to build buzz and garner loyal customers – and retailers love social media because for the most part, it’s free. But in reality, building a customer base requires some more upfront investment.

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The method is only as useful as its underlying strategic objectives. The competitive parity method is a common strategy utilized by companies that wish not to be out-advertised by the competition. The strategy involves using competitor advertising spending as a benchmark for a company’s own spending. Since advertising costs will also be ultimately recovered from the customers, the prices of the products will increase. The point is, if you’re not investing heavily in digital marketing, you’re being left behind by your competitors and you’re missing a huge opportunity for visibility to your prospects and customers. Facebook represented the largest share of that paid social pie, with 91% of marketers currently investing in Facebook, but 26% planned to spend less on Facebook in the coming year.

Firms seeking to grow market share will likely be on the high side of these averages vs. firms planning for modest growth, which may be on the lower side. Digital spend is only a portion of total marketing spend for most businesses. A Pew Research study from 2019 shows Facebook maintaining their dominance in social media platform usage in the United States. And while Facebook has leveled off in usage, it remains an important channel for many marketers despite some recent controversies. The report above from cmosurvey.orgshows the variation in the expected rate of increase in marketing spend, not the actual increase.

You can get more out of your marketing budget by distributing it among strategies that naturally complement each other. Rather than investing in two completely separate tactics, you can invest in two tactics that naturally enhance each other. For example, content marketing and SEO are two strategies that could feasibly be invested in separately; but if you invest in both of them, each will help the other see better results. In this case, content will give you more opportunities to build relevance for your target SEO keywords, and SEO will drive more traffic to your content so it gets more views, shares, and conversions. @jaysondemers, Founder and CEO of AudienceBloom, shares his insight.