A marketing budget sets the guardrails for your business’s spending on marketing initiatives. It informs how much to spend and how you allocate money, based on your business goals and marketing priorities. An effective marketing budget can tell you where every single marketing dollar goes—and help you keep track of what each one brings in.
What does a marketing budget consist of?
Your marketing budget will tell you how much you’re spending over a specific period of time, and what you’re spending it on. Here’s a detailed breakdown:
- Total marketing budget
- Time frame
- Individual budget allocations
- Actual marketing spend
Here’s a detailed breakdown:
Total marketing budget
This is the amount of money you intend to spend across your marketing initiatives.
This is the time period in which you intend to spend that money. Set a specific start date and end date for the period. Many businesses set budgets annually, so your run dates might be January 1 to December 31 of a given year.
Individual budget allocations
This is a detailed breakdown of how much money you intend to spend on different marketing channels and/or campaigns. If you have multiple campaigns planned—brand awareness campaigns or product launch campaigns, for example—create an allocation by campaign. You’ll also want to allocate by channel: paid social, paid search, print ads, PR management, and the like. Finally, allocate for any one-off projects like an event or new market research.
Actual marketing spend
This is the amount of money you actually spend. It might be different than what you intended to spend. Make sure to include space for this on your budget spreadsheet, and diligently track all marketing expenses and track spending over time.
How to develop a marketing budget in 4 steps
- Decide how much to spend
- Consider your goals and learnings
- Allocate budget across channels and campaigns
- Make a plan for measurement
An organized marketing budget can help you maximize your return on investment (ROI) and keep your marketing spend on track. Here’s how to create one for your business.
Decide how you will organize and track marketing budget information. Marketing teams typically track this information using a budget spreadsheet. You can create one from scratch or use an existing marketing budget template as a guide.
1. Decide how much to spend
Evaluate your total operating budget and allocate a percentage of funds for marketing investments. According to Gartner, the average marketing budget for businesses in 2022 was just under 10% of total business revenue, but your number may be lower or higher depending on your business needs and marketing goals.
Then, decide how you will organize and track marketing budget information. Marketing teams typically track this information using a budget spreadsheet. You can create one from scratch or use an existing marketing budget template as a guide.
2. Consider your goals and learnings
Review your overall business goals and your marketing goals. Then consider whether you can reasonably pursue these goals with your available budget. If not, consider setting more achievable goals for this budget cycle, and retain the more ambitious goals for the future.
Next, evaluate any current and past marketing efforts, considering whether previous marketing campaigns delivered on their goals. Calculate the ROI for marketing tactics you used in the past, and apply learnings about successful versus unsuccessful channels to your allocations in the next step.
3. Allocate budget across channels and campaigns
Use your marketing goals to set marketing priorities and allocate budgets by channel and by campaign. For example, if your top marketing goal is to increase organic traffic to your website, you might prioritize spending on SEO-driven content marketing. If you have a product launch campaign planned, you might prioritize spending on paid social.
If you get stuck, conduct cost-benefit analyses to prioritize tactics. For example, if your goal is to generate 50 new leads per quarter and you’re deciding whether to allocate that budget to advertising or events, identify the marketing tactic you’d pursue in each area. How much would it cost to attend a conference, and how many leads could you expect to gain? How many leads could that same budget generate through Google Ads? Calculate cost-per-lead and choose the less expensive strategy.
Once you’ve identified tactics, set budgets for each and fill in upfront marketing costs, such as licensing fees for marketing automation software and other marketing technologies.
4. Make a plan for measurement
Decide how you will measure ROI for your marketing spending. You might include performance metrics like how many site visits a channel generates, as well as financial metrics, like the total increase in sales revenue attributable to marketing dollars.
Make sure to plan for tracking the success of both digital channels and offline channels. Tracking ROI on traditional advertising efforts can be trickier than tracking ROI for online advertising campaigns because you can’t get a direct response. Consider incorporating indirect metrics such as increase in sales not attributable to other marketing activities.
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What are some common mistakes companies make with their marketing budgets?
Marketing budgets are a lot of work. They also represent a lot of money, cover a relatively long period of time, and contain a cascading set of business goals, marketing goals, marketing priorities, and corresponding marketing tactics.
In short, a marketing budget is a powerful tool—and there are plenty of ways to go off the rails while making one. Avoid these common mistakes to cut your learning curve and stay on track.
Mistake #1: Not diversifying enough
Marketing is both an art and a science. Market research, cost-benefit analyses, and careful measurements of ROI should nudge your marketing strategy further into the realm of science—but at the end of the day, it’s normal not to know exactly which tactics will pay off.
To maximize your chances of success, diversify your marketing mix by allocating budgets across a range of marketing areas and testing multiple tactics within each. After you gather enough data to make a confident assessment of what actually moves the needle, then you can double down on what’s working.
Mistake #2: Diversifying too much
If you engage too many different marketing channels or stretch your budget too thin, you might end up with too little investment per tactic to see results. Over-diversifying can also make it difficult to track ROI. Each tactic (and each vendor employed to support that tactic) will report metrics differently and deliver the data through a different channel. If you engage 10 partners on 20 tactics, you might struggle to gather and analyze your information.
Mistake #3: Not making a plan for measuring ROI
Measuring ROI is critical to the success of any marketing strategy. During the budgeting phase, your main task is to determine how you’ll measure success and confirm that you have the tracking capabilities to accurately attribute ROI to each of your tactics. If you’ll use marketing technology or contract with third-party vendors, identify their reporting capabilities and ask how and when you can expect to see reports.
Mistake #4: Focusing on one part of the sales funnel
Your marketing budget will ensure that you allocate marketing funds across different marketing areas—but it won’t necessarily account for the stages in your sales funnel. Marketing leaders sometimes focus on getting consumers into the top of the funnel, neglecting to allocate a budget for efforts that nurture leads and result in sales. For example, if you spend all of your marketing money on social media ads but fail to engage lead-nurture tactics like email marketing or ad retargeting, you may not be able to convert new leads to customers.
Marketing budgets FAQ
How often should you review and adjust your marketing budget?
Building a marketing budget is a lot of work, and it also takes time to gather data and evaluate results. For this reason, marketing budgets are typically established for either an entire calendar year or, at minimum, for a fiscal quarter. Review your budgets monthly to check spending and review metrics, and let this data tell you when to make adjustments. If you see particularly strong results (or particularly poor ones) in one area for several months in a row, it may make sense to reallocate a portion of your budget at the end of the quarter.
Should my marketing budget be the same every year?
Not necessarily. Your marketing goals and company revenue will likely change every year, so resist the urge to simply recycle last year’s budget during this year’s budgeting season. Instead, develop a new marketing budget based on current business goals, your updated financial picture, and ROI on last year’s efforts.
What is the difference between a marketing budget and an advertising budget?
If your marketing budget is a pie, your advertising budget represents one piece. Your marketing budget might also include budgets for public relations, events, product marketing, branding, and content marketing.