Determining the right marketing budget can be a daunting task and one that changes from year to year. For many SMBs, a marketing budget is last on the list of priorities; only 54 percent of small businesses have marketing budgets and the smallest of them operate with no budget at all.
Don’t base your marketing budget on what’s left after expenses. Invest in marketing. Plan for it just as you do every other part of your business. As we’ve seen in during times of crisis, having a plan (and being able to pivot that plan) is crucial to ensuring your business survives. Make marketing your business a priority to keep the pipeline full.
How much marketing budget are we talking?
To give context, small businesses under $5M in revenue allocate, on average, between 7 and 8 percent of their revenue to marketing. This is according to the U.S. Small Business Administration (and also assumes that your business has 10-12 percent margins). Depending on your business size and company revenue, here are some examples on how that might shake out:
The table above outlines benchmarks to remaining status quo — you’re not looking to increase market share or reach significant growth goals in the near future. On the other hand, if you’re looking to grow or make significant headway in the market, a marketing budget of between 10 and 12 percent of revenue is ideal.
Industry will shape your marketing budget as well. For instance, B2B product industries tend to allocate an average of 10 percent of revenue to marketing whereas B2B service industries lean higher at 15 percent. Keep in mind, the above numbers assume a normal market; these are not necessarily budget allocations in times of distress of business hardships.
Where are those marketing dollars spent?
No one likes to talk about money; but if we don’t talk about it, how will we set realistic expectations? Talking about marketing budgets and spend up front allows you to plan appropriately. In the long run, it will save you time as you look for vendors, services or others to help you reach your marketing (and business goals).
Your marketing priorities will be different depending on business goals, needs and growth. There are also some overarching trends to note that may influence your spend.
Budget allocations vs. real spend
Budget allocations in 2020 landed heavily in website optimization (73 percent), digital media (65 percent) and digital marketing (57 percent) according to Deloitte’s annual CMO Survey. However, actual budget spend fell to the lowest recorded levels at just 6.4 percent of company revenues across all industries when comparing 2020 to 2021, according to Gartner’s CMO Spend Survey. While businesses were optimistic that marketing budgets would bounce back after a hard 2020, that was not the case.
How do we allocate marketing budgets?
If you’ve never budgeted for certain marketing tactics, the following benchmarks can help. Keep in mind, these are estimates and are provided to get you thinking about scope and needs. Economic impacts and real-world revenue sources will impact bottom lines in all areas. For the purposes of this article, I’ve outlined what I feel are the top marketing budget items that typically account for larger percentages of your marketing budget:
- advertising
- video
- websites
- consultants/agencies
- design and print
- digital content
Advertising budget
While there are too many options and channels to outline in terms of what to spend on advertising, consider allocating percentages of your marketing budget for traditional and digital advertising. For example, consider:
- Social media advertising (Facebook, Instagram, LinkedIn, Twitter, Snapchat, YouTube, TikTok, etc.)
- Podcast advertising
- Print ads or bylines in industry/trade journals (great for B2B focus)
- Banner ads or pay-per-click ads (Google, Bing)
- Advertorials, sponsored content, radio interviews
- Awards (many times, awards are pay-to-play after nominations)
Understanding the platforms is key to determining an advertising budget that works for your business needs. Your dollars will go farther on Facebook and LinkedIn, for instance, than on Google. But, you’ll pay a higher cost per click for LinkedIn ads than Facebook ads.
Understand how much it will cost for the channels you wish to use and allocate a higher percentage of your budget to the channel(s) that have higher costs associated with the return. Know that advertising is also long-term; people have to see your message more than once (more than 3, 4, 5 times) to act. Always ask about your ROI when you’re being approached to purchase ad time.
Video budget
A video project can cost between $1,000 and $20,000+. Scope of the project and video length will determine cost. As you plan for video as part of your marketing mix, consider the following as these elements will impact price:
- On-location shoot vs. stock footage, illustrations or phone clips
- Additional design elements (transitions, voice-over)
- Stock music and/or photo purchases
- Scripts or scrip writing
- Length of video and needs
Consider all the ways in which you will use your video as length and formatting will be different. Video embedded on a website versus used on social media versus used during an in-person event will all have different specs and length requirements. Talk with a trusted videographer to walk through options and determined needs.
Website budget
Websites don’t have to break the bank, but in order to be most effective (and not have to re-do elements once your site is live) it’s best to go with a professional. A website project from start to finish can cost anywhere between $8,000 and $75,000+. Consider:
- Sitemaps, design, layout and programming
- Hosting, merchant services or ecommerce needs
- Monthly updates and/or content management
- SEO, keyword research and metrics
The amount of pages doesn’t drive cost–that tends to be a common misconception. Functionality, user experience, customization, ecommerce, automation and design–those are the elements of a website that drive cost.
Marketing agency or marketing consultant fees
Marketing consultants and agencies typically use one of two fee structures: retainer-based and project-based. Retainer-based services provide a consistent monthly cost at an agreed upon number of hours. Project-based services are typically (though not always) billed hourly. Before determining your budget needs to bring on an outside marketing agency or consultant, consider:
- Breadth of knowledge
- Savings in overhead costs
- Benefit of full-service vs. individualized projects (a different consultant for each piece of the project)
- Time and resources
- Extension of your team
Marketing agency retainers can range between $1,500 and $10,000+ a month. Hourly rates, depending on services and the market you’re in, can range between $75 and hour and $250-$300 and hour.
Design and print budget
While a majority of marketing tactics are focused on digital, there is still room for print. And, there are key areas to understand about this process that will help you as you determine your design and print marketing budget. The first is size and quantities–print vendors can’t give you quotes without that information, so start there. Be prepared to know the answers to:
- Approximate size of printed piece (and number of pages, if applicable)
- Binding needs
- Mailing needs
- Double-sided? Full color? Special folds?
- Paper type
Working with a designer can help alleviate some of the stress from above. Great designers work with your print vendor (or bring in vendors they trust) and talk through the project specs and scope to get you an appropriate quote.
Digital content budget
One could argue that all of the above-mentioned areas also fall into the digital content area. While that is true, most of the articles out there outline marketing budgets related to digital ads and paid media. But what about organic content, writing, email marketing and social media posts? While the channels themselves are (mostly) free, the time spent to develop content across myriad of digital channels can weigh heavy on small to mid-sized companies with limited marketing resources.
When planning for digital content (outside of advertising) develop your budget wish-list by answering a few of the following questions:
- How many channels will we use?
- How often will we post?
- Who will create (write/design) the content?
- Who will monitor the content (community engagement)?
- Will we need additional software to schedule content or pull metrics?
- Where is our audience online (and are we there?)
- What is a realistic amount of time to spend creating organic content (email newsletters, blog posts, articles, social media posts, etc.)
From there, the typical question becomes: Do we manage this in-house or out-source? If the answer is in-house, the next step is to talk operation and hiring budgets with HR. If the answer is out-sourced, the marketing agency and consultant fees area will be a great resource for you.
How to make marketing budget decisions
First, assess your priorities. What is the ultimate cost of your inaction? Start there. And while it can be tempting to go with the lowest price, that’s not always the safest bet (Google “when clients ask if you can do it cheaper” and you’ll get some pretty funny memes).
Bottom line: Do your research and ask others. Make marketing budget decisions based on quality, relationships, experience and output versus lowest price.
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