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Balancing The Budget: How To Determine the Right Marketing Budget for Your Brand

Establishing a marketing budget is a tricky task for any brand marketer; investing too little could mean missed opportunities whereas investing too much could diminish ROI value. The task becomes even more difficult when you take into consideration all of the areas that fall under marketing: paid media, out-of-home advertisements, social advertising, influencer marketing, email marketing, direct marketing, SEO, and content marketing. CMO’s and startup founders alike have the difficult responsibility of not only determining how much, but also determining where to allot portions of the budget.

 

Most established brands have the luxury of looking at performance for the previous year to determine new marketing budgets. For example, if only 10% of the overall budget was allotted toward social media advertising and content creation, yet those campaigns drove the most clicks and conversions, it’s a sign that social spend should be increased in the coming years. On the other end of the spectrum, if audiences simply did not respond to any of the direct mailers distributed, it means that it’s time to axe that line of business. In addition to having pre-established benchmarks to work from, established companies also (most likely) already have streaming revenue to work with, boosting their assurance that investing more in marketing will not break the bank.

 

Startups on the other hand, do not enjoy either of these benefits and are at a handicap when it comes to determining a budget. But, every entrepreneur also knows that in order to make money, companies have to spend money. Even groundbreaking startups with significant potential cannot rely on viral word-of-mouth marketing to fuel growth. Because even creating viral content requires some monetary investment, especially if you want that content to close more sales.

 

Average marketing budgets tend to vary wildly by industry. For example, for consumer packaged goods brands, 24% of the overall budget is allotted toward marketing, whereas pharmaceutical companies tend to spend around 10% of their overall budget on marketing initiatives, and energy companies only siphon 4% of their budgets for marketing-related practices. The widespread rule of thumb is that businesses should invest 12-20% of their revenue streams into an overall marketing budget. And if the business is just getting started, it should invest 12-20% of its projected annual revenue for a comprehensive marketing budget. Having a set percentage in mind is crucial for new entrepreneurs looking to find secure seed investments through Angels, VCs, or, even, crowdfunding platforms. Investors want to see that new entrepreneurs have taken the time to set thorough calculations and business predictions. Breaking down exactly how much money will be needed for new marketing endeavors, and subsequently, how exactly that money will be spent, is a far more encouraging sign for investors as it signifies a business that has taken the time to realistically map out a growth plan.

 

Once you have established a set figure for annual marketing, based on revenue projects, it’s time to determine how exactly that money will be spent. Here are the practice areas every brand marketer has to consider:

 

Branding - Branding is as crucial to the success of a company as the product or service itself. Branding essentially comprises a company’s identity and serves as the basis for how consumers think of a company going forward. Using marketing budget to develop a logo, style guide, packaging (if necessary) and website aesthetic is crucial.

 

Advertising - PPC campaigns are one of the best tools to get on the radars of target audiences. However, it is not especially cheap - especially if you’re trying to enter a niche with costly keywords.

 

Social media - Customers live on social media, so creating platform-specific content to speak to target audiences is one of the best ways to wrangle new customers. Creating focused, high quality content, and investing the time to grow and manage platform communities can help new companies achieve exponential growth. With how social media has changed everything from making friends to dating, you need to budget not only for present social channels but the emerging ones like VR and AI as well.

 

Content - Every brand needs to create content. Not only is content a great way to build SEO authority, but it will also help you share your brand story and engage potential consumers on a deeper level. Email content is also a necessary practice to stay on target consumers’ radars on a weekly basis.  


Ultimately, marketing budgets are most strictly guided by two overarching factors: marketing goals and the company’s financial resources. Sure, every brand marketer would love the opportunity to try as many marketing initiatives as possible without regard to budgeting, but that is never the case. Brand marketers, especially brand marketers for smaller, less established organizations have to figure out to make the most of what they have; no startup marketer is going to have a Pepsi-sized budget to work with, so understanding which factors and practice areas will have the biggest impact on brand performance is imperative to setting an overall budget.