What Should Your Marketing Budget Really Be?

Agencies, small business, established corporations, and mom-and-pop shops alike are all faced with the same question: how much should we spend on marketing?

At Orange Label, this question is asked by clients across the board. To answer it, you might first ask yourself what line items make up a marketing budget. It should encompass all the efforts being made to promote your product or service, including advertising, public relations, print ads, social media, promotional material, and more. Because each and every marketing strategy is different, each and every marketing budget will likely be different, also.

Organizations expect to spend 12% on marketing as a percentage of their company’s overall budget in 2020, its highest level in history according to the CMO Survey of August 2019. This number represents an 8.7% growth over the previous year! The statistics speak for themselves: marketing creates revenue, and setting up your budget is a vital step in the process.

Your Budget by the Numbers

We know what most clients want – for us to cut to the chase, and give the hard and fast numbers. Just what percentage of the budget needs to be spent on marketing? Orange Label President Rochelle Reiter explains, “There are many factors that play into budgeting, such as industry, longevity in the marketplace, competition, market position, etcetera… however, a good rule of thumb is 10% of desired revenue. Share on X

The CMO Survey indicates that marketing budgets as a percentage of firm revenues are on the rise. Here is a quick snapshot of marketing expenses in Business-to-Business (B2B) and Business-to-Consumer (B2C) sectors, as a percentage of firm revenue:

B2B Product: 8.6%

B2B Services: 8.7%

B2C Product: 9.8%

B2C Services: 15.6% 

It’s reasonable to expect marketing spend to fluctuate along with revenue, but it should be allowed to hover fairly consistently around your planned allocation. For determining your overall budget within your range, the next step is to parse out the categories where your spend will go.

Determining How to Allocate Your Budget

To best analyze where your budget will make the most impact, it’s essential to look over current trends in the marketing space. The industry is seeing a huge shift toward digital marketing, and it’s fair to assume that this type of media will take up a majority of your budget. By 2023, digital ads are projected to account for more than two-thirds of total media spending. Within that sector, improving SEO was at the top of the list of priorities for 61% of marketers surveyed in 2018. 

In fact, the entire umbrella of display advertising, social media advertising, email marketing, PPC, and online video advertising is expected to make up 46% of advertising across the board by 2021. In addition, companies are expecting to spend more in 2020 on brand (+7.9%) and CRM (+8.95).  

With both digital and traditional media in mind, it’s also important to remember that across each business, marketing budgets can vary. B2C Product companies, for example, far outspend other sectors on social media marketing. Companies who receive 10% or more of their sales from the Internet, spend more (17.6%) on social media, compared to those with no sales (9.1%) or between 1-10% of sales (10.7%). Smaller companies with less than 25-million-dollars in revenue spend the most at 14.7%. 

“Most of our clients are investing in content in 2020. We’ve seen an uptick in blogs, social content such as motion graphics and long and short form video. We love this type of work and consumers are demanding it,” Reiter says. 

The expert on where to allocate your funds? Your own data. Analyzing the course of your past marketing efforts and the results within each category can help you refine and allocate your spending for the next period. 

“Some clients will come to us with a specific budget allocated. In this case, we research which strategies will provide the highest ROI based on their objectives and provide a recommended budget plan outlining what percentage of budget should be allocated to each initiative. When we are providing budget guidance, we do a deep dive into the client’s business and marketing objectives, look at industry benchmarks, analyze the competitive landscape and historical data to provide a budget that will make the desired impact in the market,” Reiter says.

What’s Typically Counted in a Marketing Budget?

When building the framework for your budget and parsing out your categories, not only are you including the actual spend on media channels and outreach, you are also including creative deliverables, and the resources that are used to create the deliverables. Furthermore, you are paying for the value created by the marketing itself. 

Marketing budgets typically include: 

Agency Fees

Market Research

Brand/Campaign Strategy

Brand Identity

Creative Production (Print, Digital, Broadcast, Video, Collateral)

Media Planning, Negotiation & Placement

Digital Campaign Management

Media Actual Spend

Social Media Content Creation and Management

Blogs

Packaging and Signage

Partnerships 

Promotions

Direct Marketing

Public Relations

Trade Shows/Events

Website 

“Marketing is an investment, not an expense if done appropriately” Share on X concludes Reiter. “We focus on building long term value for brands that we work with while keeping in mind short-term goals and objectives. This philosophy helps clients understand that it is not just about moving the needle today, but also about building value in the organization for years to come.”

For nearly half a century, Orange Label has partnered with clients to strategically create budgets that not only align with the trends in their industry, but cut through the complications straight to a clear, direct, and effective marketing budget. If you’re looking for powerful insight into how to allocate your budget, contact us today.