On average, marketing budgets make up around 10-14% of total company budgets. 

Of course, this varies by industry and how long the company has been in business.  

Small businesses generally allocate closer to 7-12% of their total revenue to marketing. 

In this case total revenue refers to all the money generated through sales before expenses are taken out.

 

So, how much should you be spending on your marketing budget in 2020? 

Here’s some stats:

  • The US Small Business Administrations suggests 7-8% of your gross revenue should go toward your marketing budget.
  • While the digital marketing budget averaged 42% of the overall marketing budget in 2019, that’s expected to jump to 45% in 2020.
  • Taking the lead in the digital marketing category is video marketing.  Video marketing will double what it was from 2016 to 2021.
  • The use of social media ads will get 25% of the digital marketing budget in 2020.

 

This is great information for you to use as a starting point.  But what should your company specifically budget? And once you set that budget, how should you, specifically, spend it?

 

Need help figuring out what your marketing budget should be and how you should spend those marketing dollars?  We’ve got the answers for you in this blog.

Grab a piece of paper, a pen, and a calculator (or your nearest computer and jump into Excel) and let’s get planning!!!

In this blog we’ll cover:

  • How to calculate your marketing budget
  • How the average company allocates online and offline marketing efforts
  • Some kick-butt strategies to make the most of your marketing budget
  • Free marketing budget template

 

>> Bonus Material — Grab Our Fill in the Blank Marketing Budget

 

How to Calculate Your Marketing Budget

Here’s a quick guide to help you figure out what’s right for your business.

calculate your marketing budget

Image by Nuanced Media

Step 1: Calculate your company revenue

Gross Revenue – Revenue received before any deductions or allowances, as for rent, cost of goods sold, taxes, etc.

Estimated Revenue – Amount of earnings projected for a given time period.

If there’s a big difference:  go with the smaller number.

Write this number down! You may need to ask your accountant or sales team for help to figure out this number.

 

Step 2: Assess company size.

Determine if you are a new company (0-5 years old) or an established company (5+ years old).

 

Step 3: Determine ideal marketing budget range

New companies (0 – 5 years old): New companies should allocate 12-20% of gross revue to marketing. This is more than what established companies should assign.

Why? Well, you’re the new kids on the block, and you need to make a name for yourself and your products/services. Marketing should be a key focus with companies that are just starting out.

Established companies (5+ years old): Older, more established companies should allocate between 6-12%.

Let’s go through 2 examples:

Example 1: Company A has been in business for ten years, and over the past two years their average gross revenue has been $1,000,000 per quarter (or $4,000,000 per year). This means Company A’s ideal marketing budget should be around $60,000 – $120,000 per quarter (or $240,000 – $480,000 per year).

Example 2: Company B is just getting started. The just opened their doors last week and have projected that they’ll make $25,000 per quarter (or $100,000 this first year). This means Company B’s ideal marketing budget should be around $3,000 – $5,000 per quarter (or $12,000 – $20,000 per year).

 

Now you’ve got an idea of how much money you should be spending on marketing, let’s move on to how to spend those dollars.

 

How should you allocate your marketing funds?

The landscape for marketing is more complex than ever.

How should you allocate marketing budget across channels online and offline?

And, how should you spread out those funds across each of the various channels?

A smart way to figure out where to use your marketing budget- review what worked for you last year.  How’d you get the sales/leads? Look at the customers who closed in 2019 and make a list of the top 10 marketing strategies that closed them.  

What clients do you currently have and how did they come to find you?  Once you fine-tune this list, you’ll know what works best for you and where your marketing efforts should go.

 

done for you marketing budget

Marketing Areas

There are so many marketing avenues that you could spend your time and money on:

  • Branding
  • Website
  • Email
  • Social media
  • SEO
  • Print ads
  • PR
  • Events
  • Training
  • And the list goes on and on

Let’s look at how other companies are spending their marketing budgets.

Digital Marketing Budget Trends in 2020

Reports from Chief Marketer show some pretty cool changes in digital marketing trends for 2020:

  • Influencer marketing isn’t going anywhere, with a whopping 92% of buyers relying on their peers to “sell them”, rather than a company.
  • Video is going big and will continue to do so. Live video ads is a thing and they’re getting the results.  If you’re not creating video ads (live, streaming, or otherwise), it’s time to start.
  • Big tech is coming on strong- 5G, AI, voice search.
  • Companies wanting to get more leads need to get interactive with their users.  Games, quizzes, and VR are a few examples of ways to do it.
  • Getting in front of your customer at the exact right time is getting harder, so understanding how to use micro-moments to your benefit will get you where you need to be.
  • Social media advertising will stay strong and showing ads in the “stories” section of the social media platforms is an excellent way to capture the attention of your buyers.
  • Online video will represent the highest growth category, with the anticipated investment more than doubling 2016 numbers by 2021.
  • Digital marketing is marching at an 11% compound annual growth rate between 2016 and 2021 with the most significant growth occurring in online video.
  • 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.
  • In 2020 you should allocate 55% of your marketing budget to digital marketing. 

The industry average spends between $200 to $350 per day on social media. This average comes from an analysis by The Content Factory, looking at the cost to outsource social media marketing services. They found that $4,000-$7,000 per month was the industry average, which works out to the above per-day costs.

 

Traditional Media

Traditional Media is far from dead.

According to Nielsen Insights, radio (old school AM / FM radio) reaches 88% of Generation Z and 93% of Millennials each week. The amount of time spent listening to radio each day increases when you compare generations from youngest to oldest.

Print claims 8.3% of local advertising spend according to BIA Kelsy.

 

 

Billboard advertisements are still effective as well. A recent Arbitron study found that 71% of consumers ‘often’ look at roadside billboards and 56% of respondents say they talk to friends and family about funny or exciting billboards they see while on the road.

 

You need multiple touchpoints to connect with a potential customer.

On average a customer uses six touchpoints when purchasing an item. These touchpoints include both online and traditional.

You need multiple touchpoints to connect with a potential customer.

Image from Knexus Group

 

To get into the mindset of your potential customers, make sure that you’ve gone through and mapped out the Customer Journey to clearly define where your ideal touchpoints are- both online and offline.

 

What can you do to help make your marketing dollars go further?

stretch marketing dollars

Safe marketing advice to consider before divvying up and spending your marketing budget:

Go through the exercise at the beginning of this post to get an idea of what your marketing budget range should be.

If you’re just starting out, it’s going to most likely take more time and money to make a name for your brand, so plan accordingly and set realistic goals.

 

“Half the money I spend on advertising is wasted; the trouble is I don't know which half.” – John Wanamaker

“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” – John Wanamaker

Focus on what works best for your brand. Don’t be John Wanamaker (quote above). Make sure your efforts are trackable so you can determine which advertising dollars are leading to actual sales.

Social media might just be where your target audience is located, but that doesn’t mean your company needs to be on every social media outlet.

Partnership programs and co-op marketing funds/activities are often overlooked. If you align yourself with other companies who have an extensive network that fits your customer demographic, it’s a great way to get in front of a new audience at half the price (or less) than marketing on your own.

Meet your customers where they are. Yes, that means mobile and other technologies.  According to Nielson.com daily time spent on mobile increased across generations — Millennials increased by 51 minutes, Gen X increased by 56 minutes, and Baby Boomers by 69 minutes.

 

mobile marketing

Image from Nielson.com

 

Use the Pareto Principle aka the 80:20 rule. While the exact proportions will naturally vary, this principle generalized that 20% of effort leads to 80% of the results.  What does this mean for you? If 80% of your leads are coming from 20% of your marketing campaigns, focus on the 20% that’s bringing in the leads, conversions, and sales!

Don’t scale up until it’s profitable. Any marketing campaign should be started small and then scaled up once it’s proven beneficial.

Make sure your brand message matches across all marketing channels.

Your marketing budget should align with your business goals. Make sure each campaign is tied to clear objectives.

Set your budget, work your plan, but remember results might make you want to reconsider where your marketing funds go. So also be willing to make changes along the way.

Stay on top of current and future trends, from social media to AI.  Understanding of current and future marketing trends can also help you to navigate the budgeting process.

 

Free marketing budget

If you’ve decided that you’re ready to get all your marketing numbers in order, download our Fill in the Blank Marketing Budget. 

>> Grab a copy of our Fill in the Blank Marketing Budget 

done for you marketing budget

In conclusion

You need to spend what you think is right for your business: enough to get your company information out there, but not so much that you go broke in the process. Setting goals and tracking results will help you get the best ROI (return on investment).

Bonus Material!

marketing budget

Marketing Budget

Grab your Fill in the Blank Done for You Marketing Budget

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Plan out your year with the 2019 Marketing Calendar with Holidays and Hashtags

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