Marketing a business is always a tricky balancing act. You need to get the word out, but you also need to be hyperaware of budget. There’s no point in spending thousands or millions (depending on how big your company is) if you aren’t going to see the money returned through sales. But how much should your marketing budget be?
Generally speaking, when you start working out your budget for marketing costs, it’s important to look at the overall budget you have for all business costs. According to Deloitte’s annual survey from earlier in 2021, the average budget for marketing is around 11.7% of a company’s total budget. If you’re keeping pace with that 11%, you are likely keeping pace with your competition.
Of course, this is just a ballpark figure and there are numerous elements that go into creating a marketing budget.
Firstly, you need to look at your industry specifically, as some sectors require more marketing than others. You should also look at your specific business needs, as well as your revenue. Taking 11% of your budget when you don’t need to do much marketing doesn’t make sense.
On the other hand, if you are looking to grow your business and have the revenue to do so, you may want to go above that figure.
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Marketing Budgets Are On The Rise
The general trend shows that marketing budgets are increasing. Over the last decade, marketing budgets have increased from 8% of business revenue up to 13%. Even B2B companies have pushed their marketing budgets up to 10% of their revenue.
It’s likely that COVID-19 and the massive shift in the way people live over the last year have had a major impact on many businesses. Some companies that diversified and failed soon realized that economic implications have a huge impact on buyer behavior. Diversification is important, but it must align with the times. Marketing needs to diversify too, and the pandemic has been a major driver in marketing budget decisions.
In the wake of COVID-19, people are now spending less because many have earned less. There is also an element of fear, which is making people hang onto their savings a bit tighter than they might have done before. This change in spending patterns has forced many businesses to get more creative and more involved in their marketing.
Knowing that, how much should your marketing budget be?
A Closer Look At Different Industries
To get an idea of where you should be placing your marketing budget, it’s important to look at the averages by industry.
These numbers are a percentage of revenue for the companies involved:
- Consumer services – 18.9%
- Education – 12%
- Tech, software and biotech – 9.7%
- Banking, finance and insurance – 9.2%
- Consumer packaged goods – 9.1%
- Communications and media – 9%
- Healthcare – 9%
- Transportation – 8.5%
- Energy – 8.3%
- Service consulting – 7.5%
- Retail and wholesale – 4.4%
- Mining and construction – 3%
- Manufacturing – 2.4%
Understanding The Impact Of The Current Market
It’s no surprise that COVID-19 has had a major impact on the market for just about every single industry around the world. Consumer behavior has changed, as has social behavior. All of this means that the way your customers interact with your brand has very likely changed, too.
In-Person Events Are Down
Businesses that used to spend a fair portion of their budget on trade shows, expos, and conferences suddenly found they didn’t have any events to spend that money on. In addition, those who sponsored live events like concerts or sports matches also had a serious cut down on their returns.
If your business used in-person events as part of their marketing strategy, it’s time to think about how this impacts your budget. Now is the time to determine if the money could be better spent in other places until those events start up again.
Social Media Is Up
As more and more people spent lockdowns and self-isolated at home instead of going out, the general use of social media saw a huge spike. It’s important to note, though, that people aren’t just using social media to share pictures of their children or their pets. They’re using it to influence their purchasing decisions. Official reviews on Facebook Pages and word of mouth from influencers or friends can play a massive part in decision making for many people now.
It’s definitely worth looking at how you can adjust your marketing strategy and your budget to put more resources into these online platforms. Even B2B companies can benefit from a strong LinkedIn and Facebook presence. This is where people are networking now, online on social media.
No More Third-Party Cookies
Google announced back in 2020 that they would be phasing out the use of third-party cookies on their internet browser Chrome. The final deadline is some time in 2022. What this means is that any paid media campaign you run online will be a lot harder to track in terms of direct leads or conversions. This will, in turn, make it harder to allocate budget, moving forward to the right channels for marketing.
Planning Your Marketing Budget
With all of these changes and challenges happening in 2020 and 2021, it can be tricky to see how much you should allocate to marketing. However, if you are asking yourself, how much should your marketing budget be, there are a few things that you can do:
1. Set Specific Marketing Goals
Knowing what you want to achieve in business is the most important step in any marketing endeavor. It’s how you measure the success of your campaigns and whether or not it was worth putting money and time into them. Your goals could be more sales, better leads, improved brand awareness, or more subscribers. It’s up to you to define this.
2. Look At Your ROI
Looking back at what you have done in the past will show you if you are getting any return on those investments. This is why it is so important to have goals and to track what you are spending. You can then weigh those up and see where you could possibly put more focus and where you aren’t seeing results.
3. Review Your Previous Budgets
Last year’s budget is always the best place to start when setting one for this year. Of course, 2020 might not be a great example of what is and isn’t working for your business. In the current climate, you might want to look to the last few years to see what trends were.
4. Put A Price on It
If there’s one thing you need to take away from all of this is that marketing is important in any climate. Budgeting for marketing must align with your business and the current economic conditions, and tie in with currency consumer trends and behaviors.