At some point, every business owner or marketing team runs into the challenge of how to create a marketing budget. Whether it’s for a single campaign or growing the company, knowing your marketing budget is the first step in increasing your return-on-investment and the overall growth of your business.
Every marketing budget you create will influence the size of your marketing team, the strategy you use to develop and execute your marketing plan, and how much you are able to spend on promoting your business.
So, how do I create a marketing budget?
The best practice for determining the size of your marketing budget is to use a percentage of your gross annual revenues (sales). Those sales can be actual, or projected if you are a startup. The exact percentage of gross annual sales you use will depend on a few factors.
- Your Industry
- How competitive is it? How saturated is the market? What is the size of your customer base? How much are your industry competitors spending on marketing?
- Your Company Size
- How many employees do you have? Can you add more employees? How much are your gross annual revenues? What are your margins? How much can your business afford to spend on marketing?
- Your Desired Growth Rate
- Are you in a high growth, moderate growth, or a stable growth stage with your company?
Setting a goal for how quickly you want to achieve a certain annual revenue, or how quickly you want to increase market share, is the most important factor to consider when choosing an exact percentage of revenues to create a marketing budget. The percentage will then be adjusted based on industry and company size.
High Growth Company
An example of a high growth company would be Mindbody, who in 2018 invested 39% of their annual revenue into marketing and saw a 31% year-over-year growth rate*.
High growth companies are usually a startup, or in year 1 or 2. At this stage they must grow fast or risk losing market share to their competitors.
A typical budget for companies in a high stage of growth is 15-30% of gross, or projected revenues.
Moderate Growth Company
An example of a moderate growth stage company would be Microsoft in 2022, who invested 16% of their annual revenues on marketing*.
Moderate growth companies have been in business for a few years and are looking to scale in order to keep up with competition.
A typical budget for companies in a moderate stage of growth is 10-15% of gross revenues.
Stable Growth Company
An example of a stable growth company would be Google in 2021, who invested 8.9% of its annual revenue into marketing*.
Stable growth companies are looking to maintain sustainable growth and keep market share from their competitors.
A typical budget for companies in a stable stage of growth is 2-10% of gross annual revenues.
*(stats by statistia.com)
Once you understand the stage of growth you’re in, how competitive your industry and market are, and have set a budget based off a percentage of your annual revenues, you need to know where and how to apply your budget in order to receive the most return on your investment.
How should I distribute my marketing budget?
There are 7 areas you should be focused on distributing your marketing budget inside your business.
Content Marketing
Content Creators partner with graphic designers, social media marketing managers, copywriters and directors of marketing to create blogs/vlogs, ebooks, case studies, guides, videos, graphics, marketing automation/emails, photos, and any other materials your company may need.
Creating and distributing quality content that moves your business forward requires time, research and effort by a team of content marketing professionals.
When budgeting for content marketing, consider the amount you want to publish each month, which platforms you want to use, and how much promotion you are looking to provide for each piece of content you create.
Digital marketing with quality content has been shown to bring in 3x as many leads as traditional marketing.
Therefore, investing 30-40% of the total marketing budget into content marketing will be your leading driver of effective marketing.
And yes, it will take more than posting to Facebook, Instagram or TikTok.
Paid Ads
Paid advertising is the best way to bring attention to your brand and traffic to your website. Any business looking to grow needs to invest in paid advertising. To do it well, you must have a paid media specialist purchasing ads on your behalf. They will know how to execute on the various platforms efficiently and effectively.
You should be investing 20-30% of the total marketing budget in paid ads.
Creative Design & Branding
A graphic designer, web developer, copywriter, and your CMO or director of marketing will work together to deliver a clear brand identity; from your logo and website landing pages to promotional items and print media, your branding and messaging must be consistent for customers.
The look, feel, sounds, & touch points must all work together. It’s important to work with professionals and specialists for any of your design needs.
You should be investing 5-10% of the total marketing budget on creative design and branding.
Public Relations & Events
Product launches, promotions, trade shows, etc are all important avenues for introducing new products and services to new and existing markets.
Maintaining and managing your brand reputation takes a lot of effort, it’s important for your team to invest time and energy into customer service and reputation management.
You should expect to spend 5-10% of your marketing budget on public relations and events.
Analytics
Data Analytics provides the opportunity for your team to make informed business decisions. Long-term growth depends on detailed data. Proper data collection requires the proper tools and experts to collect, analyze, and report on this information.
You can expect to spend 2-6% of your total marketing budget on data analytics.
Tools & Software
Proper tools and software will help your team save time, money and resources. These include: Marketing Automation, Customer Relationship Management Platforms, Content Management Systems, Email Marketing Platforms & experts in setting up and managing these systems.
You’ll spend 10% of your marketing budget on tools and software to execute your campaigns.
Staff and Personnel
Personnel costs come from salaries, training, bonuses, benefits, special events, computers, technology & other marketing needs. Without a knowledgeable marketing team you’ll find it difficult to invest time and energy into executing an effective marketing strategy and campaign that leads to a positive return on your investment.
You’ll spend 10% of your marketing budget on staff and personnel.
As of August 2024, these were the minimum salary requirements for entry-level marketing professionals retaining employment in South Carolina.
We wouldn’t recommend hiring one marketing person internally and not providing support for them to execute effective marketing. This rarely delivers a return, and typically leads to a burnt out employee and an unsatisfied leadership team.
By working together to create a marketing budget and executing an effective plan of action, our current clients are averaging a 984% return-on-investment with an average annual revenue growth of $400k/yr, at a growth-rate of 15.75% year-over-year.
We accomplish this by providing our clients access to staff and personnel who are experts in utilizing the latest tools and software to create and analyze effective content, manage platforms & brand reputations, and deliver paid media campaigns designed and built to deliver results.
Amslee Agency Capabilities
We’re more than an agency. We’re allies for ambitious leaders looking to create businesses that grow.
To learn more about our capabilities, check out our marketing services here.
When you have a question, please connect with us here.
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