How Much Should a Company Spend On Digital Marketing?

One question that every modern company has asked is how much should a company spend on digital marketing? 

In this article we’ll answer that, showing the average marketing budget as a percentage(%) of revenue, what is included in this calculation and also highlight key considerations for your business when you want to grow through generating qualified leads.

Average Marketing Budget

The typical marketing budget across all industries is 9.5% of revenue¹. 

For B2B Product companies the average is higher at 11.2%¹.

The averages do vary by industry, country and business maturity, but as a rule of thumb, growth-minded businesses should be budgeting at least 10% of revenue towards marketing.

What is Included In Marketing Spend Calculations?

There are four key areas that make up a marketing budget:

1. Internal marketing team
2. External agencies & services
3. Paid media
4. Marketing technology

This is known as the marketing resource mix and the allocation of budget is typically very even across all four elements¹.

What Should I Consider When Calculating the Spend on Digital Marketing?

As much as these percentages of revenue are a good benchmark, every company is different. So in setting a marketing budget, make sure it’s reflective of the following:

• Capacity
  There’s no point bringing in new business if you can’t service it. Your budget should align with your team’s ability to fulfil the demand, otherwise you risk damaging your reputation and customer satisfaction.
• Pipeline
  If your pipeline is light, you should be more aggressive. Investing in marketing when demand is low can help replenish leads and avoid future revenue gaps. It’s often better to market before you desperately need the business
• Expiring/At Risk Contracts
  If clients are going to leave, then you need to start work to replace them before the expiration date. Proactively investing in marketing ensures a smoother transition and keeps your revenue stable, even through churn
• Cashflow
  Marketing is a leading activity, it will take time for that investment to be returned by way of revenue. Consider your sales cycle.

• Results
  How have campaigns performed historically

• Scalability
  What is the ability to scale campaigns and activate new initiatives?

• Long Term Strategy
  Know that cutting back on marketing is a short-term move that will have a negative long-term impact on revenue.

Key Points

Growth-minded businesses are advised to allocate at least 10% of their revenue to marketing efforts. This investment should encompass various components, including internal marketing teams, external agencies and services, paid media, and marketing technology.

The composition of a marketing budget typically includes four primary areas:

• Internal Marketing Team: salaries and resources dedicated to in-house marketing staff who manage campaigns, content creation, and strategy development

• External Agencies & Services: costs associated with outsourcing specific marketing roles, such as SEO, graphic design, or specialised advertising campaigns, to external experts

• Paid Media: spend on advertising across various platforms, including search engines, social media, and display networks, aimed at driving immediate traffic and conversions

• Marketing Technology: investments in tools and platforms that facilitate marketing activities, such as CRM systems, email marketing software, analytics tools, and automation platforms

Allocating the marketing budget evenly across these four areas ensures a balanced approach that supports both the strategic and operational aspects of your business marketing strategy.

It’s important to note that while the 10% benchmark serves as a general guideline, the optimal marketing budget may vary depending on factors such as industry, business maturity, and growth goals. For instance, companies in highly competitive industries or those aiming for rapid expansion might need to invest a higher percentage to achieve their goals.

Ultimately, a well-structured marketing budget, thoughtfully distributed across key areas, positions a business to effectively reach its target audience, generate qualified leads, and drive sustainable growth.

How does your marketing budget and allocation compare?

References

¹  LinkedIn Article