Marketing initiatives drive growth, brand awareness and sales. That makes the marketing budget a crucial part of a company’s financial planning – and that’s why it’s so important to know how to create one.
In this guide, we’ll cover what a marketing budget is, how much a company should spend on marketing and how to create a marketing budget.
What is a marketing budget?
A marketing budget is a budget of how much money a company intends to spend on marketing-related projects over the quarter or year.
Marketing budgets cover expenses across various channels and strategies – all designed to promote the company’s products or services.
The marketing budget is what helps you balance your marketing expenses with your operational costs. It ensures your marketing initiatives support your business growth without compromising your funds.
Common marketing channels and strategies include:
- Advertising: Digital (PPC, social media) and traditional (TV, print, radio) advertising campaigns.
- Content creation: Blogs, videos, graphic design and other creative assets.
- Marketing tools and software: CRM systems, analytics platforms and e-mail marketing tools.
- Social media management: Organic posts, influencer marketing and community engagement.
- Website management: Website development, maintenance and optimisation.
- Search engine optimisation (SEO): Keyword research, on-page optimisation and link-building efforts.
- Public relations (PR): PR agencies, press releases and media relations.
- Market research: Surveys, focus groups and competitor analysis.
- Event marketing: Trade shows, product launches, webinars and guerilla marketing.
- Promotional merch: Branded giveaways and discount promotions.
The list goes on. As you can tell, marketing spend goes to a wide range of initiatives – and that makes the marketing budget an essential part of any marketing plan.
How much should a company spend on marketing?
What you should spend on marketing depends on several factors, namely your industry, company size and growth rate.
It’s quite common to estimate your marketing budget based on a percentage of your revenue – most companies spend somewhere between 5-12% of their annual revenue on marketing.
Here’s a brief overview of some of the factors you’ll want to consider:
- Industry: Businesses that rely heavily on consumer engagement tend to invest more in marketing (often around 8-12%) whereas B2B-companies with longer sales cycles may spend less (typically between 5-7%).
- Growth and lifecycle stage: Startups or companies launching new products typically invest heavily in marketing (15-20% or more). Established companies often scale back their marketing spend (often around 5-7%) since they’re more focused on maintaining market share.
- Business objectives: A company that’s looking to grow or enter new markets may need to allocate a larger portion of its revenue (10-12%) toward marketing. Companies focusing on sustaining their customer base may allocate a smaller percentage of their revenue (5-7%).
Regardless of how much of your revenue will go to your marketing budget, the 70-20-10 rule is a good guideline for how to allocate your budget – especially if you’re new to marketing budgets.
Following this rule, allocate:
- 70% of your budget toward strategies you know work well.
- 20% of your budget toward new strategies meant to help your business grow.
- 10% of your budget toward experimental strategies.
Step by step: How to create a marketing budget
Now that you have an idea of how to determine what you’ll spend on marketing, it’s time to look at how to create a marketing budget. To help you, we’ve made a quick step-by-step guide to creating a marketing budget. Let’s get started.
1. Define your business goals
The first thing you need for your marketing budget is a clear idea of what you want to achieve. Are you aiming to grow brand awareness, boost sales or launch a new product or service? Your marketing budget should be directly tied to your goals and objectives.
When defining your business goals, be specific with your objectives – e.g. ‘increase online sales by 20% in six months’, or, ‘reach 10,000 new customers’.
2. Analyse past performance
If you’ve done marketing before, you already have valuable data to dig into. What worked well, and where did you get the most out of your efforts? Did you spend too much or too little in certain areas?
Analyse and review your past campaigns – this will help you avoid repeating past mistakes and focus on initiatives that’ll deliver better results.
3. Know your audience
Who are you trying to reach? For your marketing to be successful, you need to understand your target audience’s habits, preferences and where they spend their time – this’ll guide you in deciding which channels to invest in.
For example, if most of your customers use Instagram, you’ll want to allocate more of your budget to social media marketing than to traditional advertising.
4. Set your marketing budget
It’s time to decide how much you’re going to spend. As we mentioned above, the size of your marketing budget depends on the size of your business and your business goals.
A good rule of thumb is to allocate 7-12% of your revenue to marketing. If you're planning a big launch or want to grow fast, you might want to lean toward the higher end of that range.
5. Pick your channels and allocate your funds
From digital ads and social media to PR and events, there are many marketing channels to choose from. Prioritise channels that will help you hit your goals and give you the best returns.
Once you’ve picked your channels, break down how much you want to invest in each. Keep in mind that some activities, like producing a video, might take a bigger chunk of your budget up front, while others, like digital ads, may require ongoing spend.
6. Monitor and adjust
Once your budget is in place and your campaigns are running, keep an eye on performance. Track what’s working and what isn’t – this’ll help you make adjustments as you go and shift funds from one channel to another if needed.
At the end of the year, review how everything performed so you can improve your strategy going forward.
Marketing budget tips
Before we wrap things up, we’ll leave you with a few extra tips for your marketing budget:
- Know your current spend: Even without a designated marketing budget, you’ve likely been spending money to attract customers. Figure out what you spend on things like advertising, digital marketing, PR, events and website development each month – this’ll give you a basis for your budget.
- Include tools and resources: Tools like CRM software, e-mail marketing tools and analytics services should figure in your marketing budget. Don’t forget to account for the marketing tools and platforms you’ll need.
- Budget for creative work: Creative assets are key to making your marketing stand out. Be sure to allocate funds to blog posts, videos, design work and other content creation.
- Consider seasonality: Some businesses see spikes in sales during certain times of the year. If this is the case for you, make sure to plan ahead and put more funds toward peak periods.
Read more: ‘6 steps: How to manage a marketing budget’
Wrapping up
A marketing budget is a balancing act. You want to spend enough to get your product out there, but not so much that you break the bank. That’s why it’s so important to prioritise getting your budget right.
By following the steps and tips above, you’ll have the right foundation for creating the right marketing budget to cover your marketing initiatives and support your overall business growth.
