How Much Should You Spend on Marketing? In 5 minutes.
Updated: Feb 17, 2021
A lot of companies let themselves be victims of their marketing - it happens to them rather than being something that they choose to do.
One way you can take more control of your marketing is by setting a budget first and then spending to that budget.
The reason that doesn't happen very often is it's hard to know how much you should be spending on marketing.
There's no one size fits all solution, so I want to share a three step process that will help you figure out what's that right amount to start with:
It starts with benchmarks, which are readily available
From there, adjust that - fine tune it - with wildcards, the things that make your business your business
Finally, sanity check that with what you are currently spending on marketing
Today, the overall average is 11.4% of revenue being spent on marketing. That's elevated from the long-term average value due to COVID depressing revenues. Typically, it's 8 - 9% of revenue.
You then need to look at things like what industry you're in, are you selling products or services, are you a B2B business or a B2C business?
All of these have different budget benchmarks that you can get and that will give you the starting place - a range for what a typical company in your market and your size would be spending on marketing.
From there, you need to look at things like your growth strategy, and how new you are.
For example, new companies on average spend 12 - 20% on marketing, where established companies can spend less - 6 - 12%. Higher growth expectations require more marketing, on average.
If you're focusing on new customers versus existing customers, that also will require more marketing, on average. And if you have a strong thought leadership program, that can in some cases allow you to spend less on marketing because of the power of that thought leadership to help your marketing.
So you take the things about your company that make you special, and you adjust your starting place benchmark range into your targeted marketing spend.
But you're not done yet.
3. Reality check
Lastly, you need to check that number against what you are spending now. Where you're starting from matters; you have to be realistic. You can't change all at once.
My rule of thumb is that at most, if your current marketing budget is far off your spending goal, at most you could afford a double marketing budget in one year or cut it in half in one year. Any more than that and it's likely to be too disruptive for you.
Now that you've got a budget in mind, you have so much more control of how you go to market.
You can rank your priority marketing programs and, just like any budget process, start from the top and work down until there's no more money left. Of course, you make some adjustments after that, but from starting with a solid spending level, you are much more able to prioritize, do the right things and not waste your money on the wrong things.