Marketing plays a huge role in starting, sustaining, and ultimately expanding a business. But, as you'd expect, it comes at a cost, creating a financial burden for many companies. To create a financially stable environment, most businesses allocate a portion of their budget for marketing to increase brand awareness and optimize sales funnels.
Marketing budgets can range from small to astronomical amounts depending on the scale of the business. With digital marketing taking over, there has been a noticeable surge in costs. In the last decade or so, marketing budgets have remained consistent with small increases year-over-year.
In any case, marketing expenses are not set in stone. Companies rarely know exactly how much money they are going to spend on marketing—it comes down to rough estimates. The following table illustrates the differences in marketing spending for different types of businesses.
|Business Type||% of Firm Budget||% of Company Revenues|
|Business-to-Business (B2B) Product||9.2%||6.3%|
|Business-to-Client (B2C) Product||16%||9.6%|
|Business-to Client Service||14.9%||11.8%|
Since there’s traditional and digital marketing, it is important to understand how marketing spending differs between the two. The offline marketing space has been experiencing a steep decline for years now, dropping single-digit percentages every year. In contrast, the online marketing space is experiencing incredible growth, with percentages rising in double digits each year.
A 2019 Gartner study showed that marketers intend to spend 29% of their budget on new marketing tactics such as web content management and digital marketing analytics platforms. When breaking down your marketing budget, expect to calculate expenses for the following:
But a marketing budget breakdown goes way beyond surface-level expenditures. What constitutes “direct expenses for marketing activities” are a series of financial investments made across various marketing channels.
When allocating your budget, consider which channels will have the highest return on investment (ROI). A recent survey shows that email marketing has the highest ROI results for digital marketers, followed closely by social media marketing.
As far as digital platform investments go, a report by Hanapin Marketing found that 62% of marketers planned to increase their PPC (pay-per-click) budgets in the future. Following Google Ads is Facebook’s own ad platform—the only true competitor to paid search platforms—which is expected to see 66% more investments by marketers.
Ultimately, how marketing budgets are allocated depends on the financial investment and the channels involved. And the numbers, despite only being estimates, can change based on industry, business type, target demographics, and marketing objectives.
When planning a marketing budget, there are a lot of things to consider—forgetting things can have catastrophic results. This is where you need a marketing budget template that can summarize any and all expenses you plan on having. Using a marketing budget template can serve as a roadmap for financial planning and future preparation.
Marketing Budget Plan (Download)
Annual Marketing Budget Plan (Download)
Simple Marketing Budget (Download)
Digital marketing budgets are slightly different from standard marketing budgets. You’ll find comprehensive templates that include plenty of categories you would otherwise forget or fail to include. Additionally, if you need help with calculations, there are plenty of online tools that can assist you with that task. Web Strategies offers a marketing budget calculator for free.
Digital Marketing Budget Plan (Download)
Social Media Marketing Budget Plan (Download)
Prior to putting together a marketing budget, answer the following questions:
If you successfully answered these questions, you have the green light to start creating a marketing budget. With that said, here’s a hypothetical marketing budget to give you a better overview of how it’s done.
Let’s say you have a total $100,000 budget for marketing. You may divide the budget in the following way:
The list is completely hypothetical and only serves to be an example of how you can allocate your marketing budget. In the end, everything depends on the channels your business plans to use and the marketing activities you will be engaging in.
Starting a small business or maintaining one comes with a multitude of obstacles, and unfortunately, marketing is more often overlooked by small businesses. Whether it’s due to financial issues or piling tasks, there are many reasons stopping small businesses from engaging in marketing.
But, how are target customers ever going to find out about your small business if they don't know it exists?
No one is suggesting that small business owners should spend more than they can afford on marketing. In fact, marketing on a small budget is totally manageable, especially if you want to run SMS marketing campaigns. A lot of effective marketing channels that boast good ROI rates are affordable for the most part.
The marketing budget is usually based on a certain percentage of total company revenue. The Small Business Administration estimates the average marketing budget for small businesses to be around 7–8% of total revenue.
A Statista report states that small to medium enterprises in the United States indicate heavy usage of digital and social media for marketing goals. This is due to a couple of factors such as low costs, potential reach, and referral potential. With a limited budget for marketing, it is obvious that social media takes the top spot as the most preferred marketing channel by small businesses.
Figure 6. Courtesy of Statista.com
Startups are similar to small businesses when it comes to marketing budgets. Logically, startups have to invest money in marketing to earn money. The problem lies in the fact that most startups are barely scraping by, having no spare money to spend on unnecessary things.
Strategic planning is vital in this regard—when a company is low on cash, every penny counts. Splurging money on marketing just for the sake of it won’t yield any positive results for startups. Having an aimless marketing strategy is just about equal to making zero marketing efforts.
One way a startup marketing budget can be calculated is by estimating the gross projected revenue of the company and using the 10–20% monetary equivalent of the figure. A typical marketing budget for a 1–5-year-old startup is around 12–20% of their total revenue. That figure is twice lower for more established companies at 1–10%.
Industry professionals recommend startups to go big with marketing in the beginning to generate market share and interest. The marketing-related expenditures can then be scaled back to be more in line with the industry average.
Movie marketing budgets can be hectic. There are so many factors that ultimately determine how huge the budget can end up being.
A medium-sized movie produced in the United States has a marketing budget worth $40 million. Big blockbuster marketing budgets can range from $150–$250 million easily since they are marketing the movies abroad as well. While generally movie marketing budgets are not released to the public, it is fair to assume that the typical movie produced in the US has a seven-figure marketing budget if not more.
The marketing spending of a movie can be broken down into five categories.
Like any other organization, nonprofits also engage in marketing, even though the general trend suggests that most nonprofits spend no dime on marketing. These budgets are significantly smaller when compared to companies in the private sector.
An interesting fact is that over 20% of nonprofits do not have a firm marketing budget at all and only spend money on marketing when the need arises. Yet this is the reason that nonprofits go under pretty quickly. Marketing helps create fundraising opportunities and attract new partnerships, all of which can raise funding on their own.
There is no data available about marketing budgets for non-profit organizations which makes it hard to track their marketing spend or what percentage of their total funds is devoted to marketing.
The restaurant industry is particularly tough and has arguably the highest failure rate across all industries. When revenues stagnate, most establishments make the mistake of cutting down on marketing costs or abandoning them altogether. In reality, the sensible decision would be to increase the marketing budget by as much as 10% to attract new business.
Restaurant marketing budgets can range from 10–20% of the total firm budget. However, it’s generally advised to dedicate around 25–30% of your total budget for a brand-new restaurant and scale it down to 12–18% when you have an established business. As for affordable solutions, restaurants can rely on text message marketing to send discounts, reminders, and menu change alerts.
Realtors don’t spend much money on marketing, which is why marketing budgets in the industry lie on the lower side of the spectrum. In fact, a study by Real Estate Webmasters discovered that 53% of realtors dedicated less than $5,000 to their annual marketing budget in 2017. Most of the marketing investment goes to online channels, where most leads are generated. In any case,realtors can always resort to text message marketing since it has the highest open rate out of all communication channels.
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