How To Create A Marketing Budget: Methods, Line Items, Averages, and Considerations

We recently had a newly launched company that asked us to provide a statement of work (SOW) that incorporated building and executing a strategy for high growth. We did quite a bit of analysis on their system, their competition, and their pricing, in order to set some expectations for their marketing budget and its allocation.

After preliminary research, we brought some concerns back to the company that their revenue per lead was going to be difficult, if not possible, to cover the marketing budget it would require to grow the company at a consistent rate. In other words, even with an effective marketing strategy, it was doubtful that they could fuel growth without an investment well outside of their operating revenue.

This was well-received by the company who affirmed our concerns and said they were prepared for the investment as long as they could hit their growth numbers. With both of our organizations satisfied, we moved forward with an SOW. Had we not done this, we were fairly certain that we would lose the client as they watched their operating expenses rise with their revenue… but wouldn’t realize an immediate return on the marketing investment (ROMI).

Methods for Developing a Marketing Budget

Companies determine their total marketing budget by considering various factors, such as their business objectives, market conditions, competition, industry standards, and growth expectations. While there isn’t a one-size-fits-all approach, several common methods can help companies allocate marketing budgets as a percentage of revenue:

While these methods can help determine marketing budgets, it’s essential to consider the company’s unique circumstances and goals. There are some common mistakes that marketers make when determining their marketing budget. Industry standards can serve as a useful reference, but companies should also take into account factors such as their growth stage, market position, and competition when determining their marketing budget. Regularly reviewing and adjusting the marketing budget based on the company’s performance and market conditions is crucial to ensure its effectiveness.

How Much Is An Average Marketing Budget?

Various studies and reports have explored average marketing budgets for companies. While these numbers can vary based on factors such as industry, company size, and growth stage, here are some references to help provide a general understanding:

For established businesses, a marketing budget typically ranges between 5-15% of the company’s total revenue. However, startups and businesses in highly competitive markets may allocate a higher percentage (up to 20% or more) to gain market share and establish their brand. There is an exception in Software as a Service (SaaS) companies, which spend quite a bit more on sales and marketing.

It’s important to remember that these are general figures, and marketing budgets can vary significantly based on economic and individual company factors. Using industry benchmarks can be a helpful starting point, but companies should also consider their specific objectives, market position, and growth expectations when determining their marketing budgets.

Marketing Budget Line Items

A balanced marketing strategy should take into account the company’s unique goals, target audience, industry, and resources. While the comprehensive marketing budget line items below cover a wide range of marketing activities, it is not necessary for a company to use all of these line items in its strategy. Instead, businesses should focus on the marketing activities that are most relevant and effective for their specific needs.

  1. Advertising and Promotion: Engages the target audience through paid marketing channels, increasing brand visibility and generating leads.
    • Digital advertising
    • Event marketing
    • Influencer marketing
    • Sponsorships and partnerships
    • Traditional advertising
  2. Branding and Design: Establishes a cohesive and recognizable visual identity, enhancing brand recognition and credibility.
    • Brand guidelines
    • Logo and visual identity development
    • Marketing collateral
    • Packaging design
    • Website design and development
  3. Content Creation and Management: Develops and manages engaging content to inform, educate, and entertain the target audience, fostering brand loyalty and generating leads.
    • Blogging and article writing
    • Copywriting and editing
    • Graphic design
    • Photography
    • Podcast production
    • Video production and editing
    • Webinar production
  4. Email Marketing: Delivers personalized and targeted content to subscribers, nurturing leads and maintaining customer relationships.
    • Email campaign creation and execution
    • Email list building and management
    • Email marketing software and tools
    • Email template design
  5. Market Research: Provides insights into customer needs, preferences, and trends, informing marketing strategies and tactics.
    • Focus groups and surveys
    • Industry reports and whitepapers
    • Primary research
    • Research tools and platforms
    • Secondary research
  6. Marketing Strategy and Planning: Sets the direction for marketing efforts, ensuring alignment with business objectives and maximizing the effectiveness of the budget.
    • Competitive analysis
    • Market segmentation
    • Marketing goals and objectives
    • Marketing plan development
    • Target market identification
  7. MarTech Stack: The technology and digital Infrastructure that facilitates efficient marketing operations, automate tasks, and provides valuable data and insights.
    • Analytics and reporting tools
    • Content management system (CMS)
    • Customer relationship management (CRM) software
    • Data cleanliness and enhancement costs
    • Email marketing software
    • Marketing automation tools
    • Project management software
    • Social media management tools
    • Search engine optimization (SEO)
  8. Mobile Marketing: Reaches and engages customers through mobile devices, leveraging location-based targeting, mobile apps, and SMS/MMS campaigns.
    • App development and maintenance
    • Location-based marketing
    • Mobile advertising
    • Mobile analytics and tracking tools
    • SMS/MMS marketing
  9. Public Relations: Builds and maintains a positive image for the brand, fostering trust and credibility through media relations, press releases, and events.
    • Crisis management planning
    • Media outreach and relationship building
    • Press releases
    • Publicity events
    • Reputation management
  10. Social Media Marketing: Builds and maintains an online presence, fostering community engagement and expanding the brand’s reach.
    • Community management and engagement
    • Content creation and curation
    • Influencer partnerships
    • Social media advertising
    • Social media profile setup and management
  11. Human Resources: Invests in the skills and expertise needed to execute marketing strategies and maintain a high-performing team.
    • Agency fees
    • Freelance or contract staff
    • Marketing team salaries and benefits
    • Recruiting and onboarding
    • Training and professional development
  12. Miscellaneous Expenses: Covers a variety of other costs to support marketing efforts, testing new channels and mediums, maintaining compliance, and addressing unexpected needs.
    • Contingency fund
    • Innovation fund
    • Legal and regulatory compliance
    • Office supplies and equipment
    • Printing and production costs
    • Software and technology subscriptions/licenses
    • Travel and lodging for marketing events

Factors That Influence Marketing Budgets

Here are some factors to consider when deciding which line items to include in a balanced marketing strategy:

A balanced marketing strategy should focus on the marketing activities that best align with the company’s objectives, audience, and resources. It’s essential to regularly review and adjust the strategy based on performance data and changing market conditions to ensure its ongoing effectiveness.

Artificial Intelligence Is Already Impacting Marketing Budgets

Artificial Intelligence (AI) is already having a significant impact on marketing budgets and will continue to shape the way companies allocate resources in the future. Here are some ways AI affects marketing budgets:

AI will continue to impact marketing budgets by increasing efficiency, improving targeting and personalization, enhancing analytics, and shifting the required skill sets within marketing teams. Companies should consider the potential benefits and challenges of integrating AI into their marketing strategies and adjust their budgets accordingly.

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