The 3 Drivers of Marketing Budget
Updated: Nov 3, 2022
Today's marketing triple is all about money. How much should you spend on marketing for your business? I've found that there are three drivers that can largely help you determine what that marketing budget amount should be for your particular business.
The first one is your business model. So what industry are you in? Are you selling a service or are you selling a product? Are you making the product or are you reselling the product? All of these factors change the average amount of investment companies in that business model would spend. You may spend more or less than that, but as a starting place, it's a great way to get a baseline. The good news is there are a lot of statistics available online with the average percent revenue spent on marketing by industry buy business model that you can use as a starting place.
Secondly is your business goals, and specifically, I'm talking about your growth goals. So are you a new company that's trying to create awareness for yourself and needs to create new markets and new customers right from scratch? That's going to need more marketing than a company that is established and maybe isn't looking to add new clients as much as they are to grow existing clients. It's a different kind of marketing, but also a different level of spend, usually. So thinking about those growth goals in turn - existing customers, new customers, growth rates, those kinds of things - will affect how much you should spend on marketing. So consider those as wild cards to adjust.
And then third is your current budget. How much you're spending today is important because change is hard, right? If you found, for example, that from your research you feel like you're underspending your marketing by 5X, I do not recommend that you go and quintuple your marketing spend in a year. That's because you would not be able to take in all of that change and do it efficiently. My rule of thumb is that at most you should change your marketing spend by doubling or cutting it in half in any one year, and then just take a few more years if you need to grow more than that.