How much should I budget for marketing?

đź’ˇ Executive Summary: Small and middle market businesses should invest 6-10% of their annual revenue back into marketing, with their exact percentage being determined by their growth goals. These budgets are often divided between identify maintenance, brand awareness, lead generation, and audience engagement.

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hands determining a marketing budget

Building the company budget often comes with many unknowns and a lot of opinions from company leadership. Marketing can often be the most nebulous aspect of the business, so pinning down a specific number for the yearly budget might be a difficult task.

The short answer

Fortunately for small and middle market businesses, finding the right starting point for your marketing budget doesn’t have to involve a lot of guessing. Several well-known organizations, such as Forrester, Gartner, and Duke University, have surveyed businesses from around the world to get a sense of the “standard” marketing budget. Their findings: most businesses invest between 6-10% of their annual revenue back into marketing.

Of course, it’s important to mention a few caveats. First, this range is primarily based on B2B businesses. Depending on their business model, B2C businesses often require even more significant marketing budgets.

Beyond your audience and business model, where exactly you fall in this range is primarily determined by your growth goals. If you aren’t interested in growing and only sustaining, your marketing investment will likely sit at the lower end of that range. If instead you have big ambitions, like growing your business 20% within the next year, then you should expect to be investing at the upper end of the range or even beyond.

Now that you’ve narrowed the starting point for your budget into a tight range, let’s discuss the factors that will help you lock in a specific number.

What do you need to consider when building a marketing budget?

Building a budget of any kind requires a lot of reflection. For example, if you are putting together your family’s transportation budget for the year, there are a number of things to consider:

  • How much will I need to spend on fuel each month to get to where we need to go?
  • Do I have any big trips planned that will require extra expenses?
  • Do I have any foreseeable vehicle repairs this year?
  • How much is a good “safety net” in the event of unforeseeable repairs?
  • Will I need to purchase a new vehicle?

Each of these factors are very different, but they all influence how much you should set aside for your total transportation budget for the year.

Building a marketing budget is similar. You will need to consider:

  • What are my growth goals for the year?
  • What segments of my audience am I hoping to attract the most?
  • Are there any aspects of my marketing (such as my brand, my website, etc.) that need significant attention this year?
  • Do I have any big launches or events this year that will need special promotion?

Having a vision in mind for the year ahead will give you clarity when budgeting for different marketing activities.

What activities should you budget for every year?

No matter where you are in your marketing lifecycle, there are certain annual activities that you will need to budget for.

Identity maintenance

The world changes from year to year, and your brand should adapt along with it. That being said, you shouldn’t be updating your logo and brand standards every year, but you should set aside some money for certain annual activities that keep your brand in good shape. These activities could include:

  • Producing updated videos about your company culture, mission, goals, etc.
  • Creating new branded materials for sales engagements and events
  • Revisiting your core brand message
  • Updating your branding or company website if necessary
  • Updating content so it is clear that it’s fresh

Brand awareness

Even if you haven’t relied on marketing to get you noticed in the past, keeping your brand silent will eventually cause problems. Every business should contribute some of their marketing spend to activities that will grow their brand awareness. These activities aren’t for generating leads directly, they just remind the world that you exist. Brand awareness activities could include:

  • Sponsoring broadcasts or events
  • “Top-of-funnel” digital advertising campaigns like paid social or video ads
  • Traditional advertising like billboards or direct mail
  • Organic social media

Lead generation & promotion

Your marketing should make you money. For many companies, lead generation is the most important line item on their marketing budget. However, even if you aren’t in need of immediate leads, you will always have something to promote. You may need to advertise an event, encourage donations, or recruit employees. Promotional marketing activities can help with all of these things. They can include:

One of your marketing department's most important functions is communicating with your audience of both prospective and existing customers. Your communications should be engaging and educational to guide your audience along their decision making journey. This aspect of your marketing budget is easy to overlook, but in reality, it is likely the most crucial area of focus for maintaining your reputation and closing deals. Audience engagement activities include:

How much should you budget for each activity?

How much you budget for each marketing activity depends on your goals as a company. While every company’s position is unique, below are a few common scenarios and rough budget recommendations for each.

You are trying to breathe life into a neglected brand

  • Identity maintenance: 50% of your yearly budget
  • Brand awareness: 30% of your yearly budget
  • Lead generation/promotion: 10% of your yearly budget
  • Audience engagement: 10% of your yearly budget

You are trying to grow your authority in your market

  • Identity maintenance: 15% of your yearly budget
  • Brand awareness: 30% of your yearly budget
  • Lead generation/promotion: 15% of your yearly budget
  • Audience engagement: 40% of your yearly budget

You are trying to scale your company

  • Identity maintenance: 10% of your yearly budget
  • Brand awareness: 20% of your yearly budget
  • Lead generation/promotion: 50% of your yearly budget
  • Audience engagement: 20% of your yearly budget

Hopefully this helped you to approach the budgeting process with a little more peace of mind. If you have more questions about which wise marketing tactics to spend on, check out our digital marketing frequently asked questions, or read more below:

Frequently asked questions about marketing budgets