The sales numbers aren’t adding up, you’re employing every strategy you found on Google, but nothing seems to click. Where are you going wrong? Maybe your marketing budget isn’t in place but how much is enough to get your brand noticed? How do you calculate if it’s too much or too little to generate any return on investment? As always, the challenge is to find the right balance while getting plenty of quality leads.
So how much should you spend on marketing?
A survey conducted by CMO in 2021 showed that organizations spend anywhere between 10.4% – 13.7% of their company budget on marketing. Although this number varies from industry to industry, this could give you a small idea of how much you should be spending on marketing. What you might want to break down is how much of that budget should you spend on different marketing strategies. With the world of tech taking over, companies are shifting much of their marketing efforts to digital platforms.
In addition to dividing between digital and traditional methods of marketing, you need to figure out which channels get your better results. The easiest way to put this is, spend more money where you’re getting the most return. Make use of analytical tools to determine which channels perform consistently over time and which ones are not yielding good value.
5 Things to Consider When Setting a Marketing Budget
There are multiple strategies companies use to develop a marketing budget. Here are some guidelines that can help you in setting the perfect marketing budget for your company
Industry : One of the common ways is setting a percentage of revenue for marketing based on your industry type. You can learn how much your business can allot for its marketing budget based on the table below
|Marketing Budget (% Of Company Revenue)
|Mining and Construction
|Consumer Packaged Goods
|Banking, Finance, Insurance, and Real Estate
New Companies: Business running their operations between 1 – 5 years of age can invest anywhere between 12% – 20% of their total revenue towards marketing. Whilst this might seem a lot, you need to remember that there are many sharks looking to capture the market share. You need to let the audience know that you exist, and therefore your marketing strategy should be aggressive.
Established Companies: Businesses older than 5 years of age can invest between 6% – 12% of their total revenue. If your business is older than 5 years and you haven’t yet invested in any marketing, you may see which strategy works better and tweak your budget accordingly.
Market: A Business-to-Business (B2B) should invest 7% – 8% of its total revenue towards marketing. Whereas for Business-to-Consumer (B2C), ideally, they should be spending about 9% of revenue on marketing.
You need to consider business goals when creating your budget and depending on your overall business strategy, you may opt to create a marketing budget that could be higher or lower than your industry’s average. How do you do that you ask? The final piece to this puzzle (drum rolls) is to find out:
Target Cost of Acquiring New Customer: A goal-driven marketing budget should determine the target cost for acquiring a new customer and how many new customers you aim to get through your marketing strategy. The last step is to multiply those and add any fixed costs. For instance, you set your target cost as $100 per customer, and you are aiming to get 100 new customers, and your fixed cost is $5000. So, the total cost would be
(100 x 100) = 5000 = $15000
If you’re busy running your business, you could also make use of a digital marketing company so that you can focus on other aspects of the business. We all know that there are certain marketing strategies you must spend time and money on so that you don’t FOMO (Fear of Missing Out). But how much does a professional digital marketing service cost? Here’s an estimate
|$500 – $10,000 + per month
|5-20% of monthly ad spend
|$1000 – $10,000 per month
|Social media marketing
|$200 – $5,000 per month
|$200 – $1500 per month
Do bear in mind that these prices vary depending on your business, and you will need to consider your goals when creating your budget. As you run your marketing campaigns, you might want to tweak them to improve the overall performance. There’s no magic formula for reaching your goals, but you can use these steps in building your brand while spending wisely.