How Much Your Organization Should Budget for Marketing

Budgeting for marketing is an increasingly hot topic in today’s business landscape. The question, “How much should we be spending annually on our marketing?” has been on our minds since the inception of marketing itself.

Businesses Grow and Die on Their Marketing Communications

Product, Product, Product

Let’s set one thing straight first—if your organization doesn’t have a quality product or service, marketing is only going to make your organization die faster. In a case like this marketing can’t save you. What it will do, however, is get more people interfacing with your low-quality product, and thus, more people spreading the word about how bad it is.

Marketing is Key to Growth

If you’ve mastered your product or service then marketing communications is the key to growing that product. Fundamentally, it’s hard to argue against this principle.

It’s a law of science at this point:

• You could have an incredible product, but if no one is ever aware of its existence then it remains at rest. A product at rest will remain at rest until acted upon by a marketing force.

It’s your marketing communications efforts that act upon that product and take it from rest to ignition. It’s those awareness well-thought-out campaigns that drives the calls to the sales team.

The Best Strategies Win

It’s not enough to just do marketing for a product. “Doing” marketing never guarantees success, especially considering that your competition is at least trying to make an effort.

Your strategy has to be laser-focused and built on understanding your ideal customers.

So marketing is important. At this point, we can all agree on its power, but how much of your hard-earned dollars should you allot to carrying it out?

The 10% Benchmark—the Bare Minimum for Growth

According to a Gartner Research Study, companies spend an average of 10.2% of their annual revenue on marketing.

That being said, we can use the 10% figure as our benchmark.

What This Benchmark Means for You

So, what does the 10% benchmark mean?

In my professional opinion, 10% of your annual revenue should be your bare minimum if you’re looking to grow. I wouldn’t go any lower than that. In fact, I might even recommend you go higher, but we’ll get to that in a bit.

If you’re looking to maintain and slide on by, 5% is perhaps more appropriate, but don’t truly expect to dramatically increase your market share.

Growing Your Business Requires Investing Back into It

Everyone wants to grow their company. They want that next step—that year-over-year growth model that continues to infinity. But you can’t simply will this to happen. The companies wishing for growth, but pinching pennies on marketing, are the ones that hit a plateau.

If you want growth, you have to prioritize your marketing communications efforts into the budget.

Yes, I realize that it might be too late in the year, but it’s not too late for the next budget. Prioritize and get serious.

Here’s the bottom line—if you’re not budgeting 10% of your annual revenue for marketing purposes, you’re not serious about actually growing.

A Key Note: Make Sure You Are Measuring Success

Once you prioritize marketing, make sure you’re picking a measurement technique to hold yourselves (and your agency partner if you pick one) accountable. If you have no way of measuring success, you’ll be spending that 10% without any way of measuring what it’s getting you.

How Fast Are You Trying to Reach Your Goals?

I can’t stress how important it is to set goals.

Let me issue a bit of caution though—there are achievable goals and unrealistic goals. That’s why it’s important to adjust your budget based on your speed preference.

Depending on your industry, it might be unrealistic to try to extremely aggressively increase your market share if you’re only willing to utilize 10% of your total annual revenue marketing budget.

How Fast You’re Trying to Grow Will Give You Your Budget

These are some relative estimates on what kind of growth budget will get you.

• If you’re looking to increase market share, and grow—10% of your annual revenue
• If you’re looking to aggressively increase market share—20% of your annual revenue
• If you’re looking to extremely aggressively increase market share—30%+ of your annual revenue

A Look at Some Other Company’s Marketing Budgets

Let’s take a look at some of the most well-known companies in the world. Although these figures might not be fully relevant for your organization, it’s helpful to see what some of the heaviest hitters are spending on their marketing, and what the ROI is.

Twitter has spent 44% of their total revenue each year. The results are absolutely staggering as they’ve doubled their revenue each year, year over year.

How much is 12% of Google’s annual revenue you ask? Somewhere around eight billion.

What Spending Marketing Dollars Can Look Like

You might be wondering, “OK—so I need to spend 10% of annual revenues on marketing activities. What exactly is that money getting me?”

An Internal Team

First and foremost, this could easily manifest as a marketing department. The budget would go directly to your team and to anything they use to do their jobs (softwares, resources, ad spend, etc.).

An internal Team and Agency Combination

Another common combination is an internal team and an agency, which has a cost of its own.

Full Outsourcing

It’s not uncommon nowadays for organizations to outsource all of their marketing to an agency. In this case, the agency would utilize the budget for their service fees and anything they use to do their jobs.

It Takes Money to Make Money

At the end of the day, it takes money to make money. If you’re not committed to investing back into your business, don’t truly 3expect to see it grow.