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Jorge Pacheco
By
February 02, 2021

How to Easily Calculate Your Digital Marketing Budget for the Year

Digital Marketing keywords such as: performance, SEO, brand, website.
Figuring out your digital marketing budget can be daunting and quite confusing and many business owners fail to determine how much of their company revenue should feed into their digital marketing strategy. Let’s dissect this a little more…

I don’t have a marketing strategy, I just pour money into campaigns whenever my company needs new leads?

This is very common with small and medium businesses. You might think that you can funnel money toward a campaign only and whenever you are looking for leads and then scale back marketing spend once your pipeline is filled up. But, the truth is that, for most businesses, this approach won’t work

The reason for this is that a marketing strategy is not like a faucet that you can just turn on and off. In fact, moving leads through the sales funnel (awareness stage, consideration stage and decision stage) takes the average B2B business anywhere from three months to over a year. So, independently of where your business stands today in that scale, you need to discover and work toward closing the gap between the launch of a campaign and actually converting any leads into customers. And, there is no other way to do this than by setting up a marketing strategy and budget for the year. By doing so, you ensure you’ll create a constant plan to attract leads through your pipelines at all times.

Buyer's Journey Explained: Awareness Stage, Consideration Stage, Decision Stage
(source: https://www.tributemedia.com/blog/the-buyers-journey-explained)

OK, I get it. I need a marketing strategy and budget, but how do I determine how much I should be contributing to a marketing budget?

The most truthful answer is “it depends.” It depends on your company, your market, your consumers, your goals for growth and your competitors. And these are things that can be answered with quantitative data. So, let’s talk about the three main variables that affect determining a marketing budget: company revenue, what’s your position in your specific industry and what your goals are.

How much should you spend on your marketing budget? Get this ready-to-use calculator to find out your marketing plan budget!

1. Company Revenue

There is no way around it, businesses attribute the success of any strategy to the direct revenue it generates. This is a completely different conversation we can have in a separate article. For now, know that the inverse also takes place: the more revenue you invest into your marketing budget, the more success you’ll see from any implemented strategy (obviously, assuming that you have a solid strategy in place and the right team to implement it). This way, you ensure your business has more support to continue to generate leads and build new revenue.

According to these three primary reports Marketing Budgets Average Around 10% of Total Revenue: Gartner’s “The Annual CMO Spend Survey 2019-2020,” Deloitte’s “The CMO Survey, August 2019” and Growth Marketing Stage’s “Marketing Budgets 2019-2020.” Thinking about it in dollar terms, a company with $2 million in revenue would spend $200K on marketing, a company with $20 million in revenue would spend $2 million on marketing, and so on.

Another variable we found is that to be competitive it appears that smaller companies have to spend more of their income on marketing than larger companies.

Graph: Marketing Budget as a Percentage of Revenue(Image source: The Growth Marketing Stage survey)

2. Position Within Your Industry

As a general rule, new businesses should invest more in marketing spend than well-established companies as they rely much more on brand reputation and recognition. However, if you’re well established and are the main player in your market, you should not cut your marketing budget or have it play an intermittent role. Instead, you should know how the playfield looks in your industry and what the other players (competitors) are doing in terms of marketing and branding. For example, according to Deloitte, there’s a significant variance in spending by industry, all the way from 24% of revenue spent on marketing in the consumer packaged goods industry down to just 4% in the energy sector.

Graph: Percent of Revenue Spent on Marketing, By Sector(Image source: Deloitte)

How much should you spend on your marketing budget? Get this ready-to-use calculator to find out your marketing plan budget!

3. Your Goals

The main question here is: What is it your looking to accomplish with your digital marketing strategy? From this question, there are a few more that come to to mind:

  • Do you need more traction to keep up with your growth goals?
  • Is it a branding issue so you can stand out from your competition?
  • Do you want to reach more/new people through a new channel?
  • Have you exhausted all your current channels and need to rethink your goals?

Any marketing budget or plan should start with goals, and then be formed to support those goals. Usually, more aggressive goals require bigger budgets, while more modest goals can be effectively supported with more modest budgets. Whatever the scope of your goals, they’ll be better met by a budget designed with them in mind.

So How to Calculate Your Digital Marketing Budget?

Now that you know the factors that contribute to your marketing budget, let’s look at exactly how you can calculate your own.

  1. Determine your annual revenue - This is the easy part of this process.
  2. Research the cost of marketing services - Whether you have an in-house marketing department or a trusted partner to outsource your strategy, the main goal here is to figure out a way to maximize your budget
  3. Determine the right percentage spend - This should be done based on your revenue, industry position, competitors and goals.

Implement, Review and Adjust

Marketing budgets aren’t static things, they are responsive to opportunity and look for efficiencies so they can make a positive impact on the overall balance of your ROI.

Finally, remember that marketing is an investment. Like any investment, it can take some time to see results, but if you invest wisely, those results can be tremendous.

How much should you spend on your marketing budget? Get this ready-to-use calculator to find out your marketing plan budget!

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