What should your marketing budget be?

Insights Article

Budgets are always a point of contention within the agency world. It is usually one of the first questions we ask with a new prospect and yet it still is a point of contention.

It’s always a sense of relief when the prospect knows exactly what their budget is and even more so if they have targets next to that (but that is for another article). But still many businesses still don’t know.

So what should your marketing budget be?...

Ultimately there is no simple answer to this, it depends on what return you are needing to hit your business goals. However, the general rule is between 10% and 15% of your overall turnover. With this increasing to 20% you are a start up with accelerated growth targets or a start up.

What impacts your budget:

There are so many factors that determine your budget, many more that can be listed here but these are some of the most important as we see it.

1. You business goals

Ultimately the goals of your business will have a big impact on your budget. If you are looking to grow your budget will be higher than if your aim is to maintain.

As a rule of thumb base your marketing budget on your targeted turnover and look to be near the 15%-20% if your business goals have revenue growth in mind.

If you are maintaining turnover, still base this on your targeted turnover but you will likely be nearer the 5% to 10% end. However your churn rate of customers will play a part in this.

2. The competition

All of your marketing is designed to get customers and users paying attention to your rather than competitors. So the amount of activity and noise in the market is a key factor in the size of your marketing budget.

A crowded market is going to cost you more to break through than a new market or niche.

3. Who your customer is

Are you selling to businesses or are you direct to the consumer. Both offer challenges that will affect your marketing budget.

On average the marketing budgets for B2B businesses are almost 50% lower than B2C.

The argument here is that the amount of people who will take action to your marketing efforts is a much smaller group than B2C. The overall audience is smaller so the amount of marketing needed is lower.

However this is caveated with the need for the marketing to be more sustained in the B2B sectors. Getting in front of the same individual more often over a longer period of time due to the longer consideration phase.

4. What you are selling

Finally what you're selling will impact your budgets. The main difference is it a product or a service.

Historically service focused companies spend more on marketing than those pushing products within the B2B sector., likely a result of the length of the sales cycles. Resulting in a 10% higher budget on average.

However spending on marketing is higher for product focussed companies when selling direct to the consumer. Most likely a result of higher competition.

Establishing a budget;

Using these factors you can quickly establish what you marketing budget should look like. See below a couple of guides to help you…

	Maintain	Grow
Low Competition	7.5% of target turnover	12.5% of target turnover
High Competition	12.5% of target turnover	15% of target turnover

B2B Service Marketing Budget

	Maintain	Grow
Low Competition	10% of target turnover	15% of target turnover
High Competition	15% of target turnover	20% of target turnover

B2C Product Marketing Budget

	Maintain	Grow
Low Competition	10% of target turnover	15% of target turnover
High Competition	15% of target turnover	20% of target turnover

B2C Service Marketing Budget

	Maintain	Grow
Low Competition	7.5% of target turnover	12.5% of target turnover
High Competition	12.5% of target turnover	15% of target turnover

Note: this is only a guide to help point you in the right direction, a full budget should be put together with the help of your financial director or those helping with your financial planning.