How much should I spend on marketing?

George Denison avatar
George Denison

Mar 18, 2020

people deciding how much should I spend on marketing

Here’s the million-dollar question:

How much should I spend on marketing?

Chances are, it doesn’t have a million-dollar answer (unless your business is particularly lucrative). Every business needs to calculate a sensible budget for its marketing efforts. But how do you figure out that magic number?

Let’s start with a little business-themed Rorschach test.

Cost centre or revenue centre?

When you look at your marketing, what do you see? A dispensable, revenue-guzzling albatross hanging around your company’s neck, or a glistening opportunity for growth?

The responses to this question are polarising. When 400 B2B marketers were asked whether their marketing was perceived as a cost centre or revenue centre:

  • 53% said it was a cost centre
  • 47% said it was a revenue centre

What was your answer?

It'll likely determine your outlook on your marketing budget. If you view marketing as a profit generator, then you’ll probably be more strategic with how you budget for it. If you see it as a cost centre, though, you might be tempted to save money by limiting marketing budgets.

When belts need tightening, marketing is often the first casualty of the cash-saving process. This can be a big mistake.

Marketing’s worth doing, and it’s worth doing well. A fresh-faced intern is cheaper than an external agency, but they won't have the skills and experience you need for things like content marketing or SEO optimisation.

There’s a price attached to that expertise, but if it's done right, it'll pay for itself. The more you invest in marketing, the more your business will grow, which will give you more to invest in marketing, and so on.

So, we’ve established that spending is better than cutting. But that still leaves the question of how much.

Read our Introduction to B2B Inbound Marketing here and learn all about this  powerful approach to generating leads and sales.

How much to spend on a marketing budget

You could take a reactive approach. Need more sales? Chuck some money marketing’s way. Is a competitor upping the ante with their promotional efforts? Quick, pump more cash into your own to keep up!

It’s easy to see why this method is flawed. If you randomly shovel budget into your marketing with no clear strategy or plan, you’re unlikely to see many solid results or understand why. As marketing pioneer John Wanamaker put it, “Half the money I spend on advertising is wasted; the trouble is I don't know which half.”

Plus, how do you know the amount of budget much your competition is spending – or how efficiently they’re spending it, for that matter? You can make educated guesses, but it’s not a very tactical way of going about it.  

Be strategic with spending

The other approach is to look at the problem from the top down. Figure out your gross revenue, then decide what percentage of it you want to put aside for your marketing.

In 2019, the average revenue spend on marketing budgets fell slightly to 10.5%, down from the previous year’s 11.2%. But ultimately, your percentage will vary depending on how big your company is and how long it’s been around for. Are you a fresh start-up, an established global force, or somewhere in between?

If you’re newer, it’s generally a sound idea to push your marketing harder, as you establish your brand and build up your customer base. This means putting somewhere between 10% and 20% of your gross revenue into marketing. If that seems extravagant, remember: no-one will buy your new product or service if they don’t know it exists.

But don’t think that you can get away with spending peanuts on marketing if you’re an established business. You might have more brand equity and loyal customers, but you should still allocate between 6% and 12% of your revenue to your marketing efforts.

It’s also worth factoring in your industry. Some industries are more competitive than others. If you’re in retail, for instance, you might want to bump up your percentage to 20% or higher.

One thing's for sure, though – if you want results, you won’t get them by thinking small. Don’t expect to see the leads come rolling in if you’re only increasing your spend from 2% to 4%. You’ve got to think more in terms of upping to 10% before you’ll start noticing a real difference.   

Once you've set a budget, make sure you know what to measure to understand your ROI. Things like traffic, qualified leads, and revenue will be key barometers of whether your marketing efforts are successful or not.   

Ready to calculate your investment?

So, what should your marketing budget be? The answer is going to be different for every business. It'll depend on your size, industry, and what you can afford. If working out how much to put aside for your marketing budget still seems too daunting, Hubspot has some handy templates that will help you get on the right track.

Just remember that while it’s good to spend budgets efficiently, slashing them won’t help your business grow. And neither will half-measures – you’ve got to make a real investment if you want to see real results.

Inbound Marketing

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