The ultimate guide to setting marketing budgets: Step-by-step process

To drive the best results, you need to allocate your marketing budgets to the right channels. However, it’s a tricky task for most of the businesses out there regardless of their industry or size. Today, even customers have got a lot of options to choose from in terms of products or services. This makes it more important for businesses to stand out in the market. 

Digital marketing especially has gained prominence over the last few years. Now, most of the businesses have shifted their focus from traditional marketing to digital marketing. According to the CMO Survey, the digital marketing budget currently accounts for 57.1% of total marketing budgets. 

From this statistic, you can understand how critical digital marketing budget allocation is. Next, the question comes how to allocate marketing budget in the most effective way. Marketing budget allocation is an important task as it decides your pathway to success. However, if you aren’t sure how to allocate marketing budgets for your business, then this blog is for you. 

Learn which marketing channels are generating the highest conversions and revenue. Allocate your marketing budget wisely with WebMaxy.

Here, we will give in-depth information about the marketing budget allocation model and marketing budget allocation best practices. 

What is digital marketing budget allocation? 

In a company, a budget is fixed for different departments or teams. Marketing budgets refer to the budget given to the marketing department. Digital marketing budget allocation refers to deciding on the amount to invest in distinct marketing channels. 

Digital marketing is vast and consists of different online communication channels. When it comes to distributing marketing budgets among digital marketing channels, it’s quite confusing. You have to decide among channels like search engine optimization, video marketing, Facebook ads, video marketing, and so on. 

For instance, you decide to invest your marketing budgets in social media marketing channels. First, you need to determine the budget that will go into the salaries and then on resources and ad spending. There are several choices, you can opt for organic advertising or paid advertising. 

Now, you can understand that digital marketing budget allocation is not easy as it seems. There are so many choices and factors to consider for allocating marketing budget. In the next section, we will discuss what to consider before deciding on marketing budgets. 

Get accurate and detailed marketing insights.

Start your WebMaxy eGrowth journey now!

Learn More!

Marketing budgets statistics 

For business owners & marketers, it’s important to make the most of their marketing budgets by investing in the right channels. Now, you must be thinking about what’s the apt budget to invest in marketing. Well, before you expect any numbers, let me tell you there’s no golden ratio. 

However, there are data available on marketing budgets that can help you get an idea. From these marketing budgets statistics, you can decide how to go about it for your business. 

• The US Small Business Administration and Counselors suggest marketing budgets should be between 2-10% of a company’s revenue.
• According to CMOs, Marketing budgets in North America and Europe in 2022 were 9.5% of the company’s total revenue.
• A Deloitte survey in 2020 shows that marketing budgets make up to 11.8% of the overall budgets.

Note: These surveys and reports are stating about the overall marketing budgets not specifically about digital marketing budgets.

Marketing budgets by Industry 

Here, we have given a report by Deloitte that shows the percentage of revenue different industry companies should allocate to marketing. 

You can use these percentages as a reference for deciding on marketing budgets in your Industry. However, remember that you can go beyond these marketing budget benchmarks based on your past performances and results.

Each company is different and what works for other companies in your industry might not work for you. Keep in mind investing in the right marketing channels is more important than your marketing budgets.

You can have the best digital marketing budget but if you aren’t investing it appropriately, it might just go in vain. Whereas, even if you have a low budget and you invest it in the right channels, the chances are you’ll get a better ROI. 

How to allocate marketing budgets across channels? 

When allocating marketing budgets, talk to your company’s finance manager and stakeholders. Ask them about the company’s annual expense plan and the level of marketing budgets they agreed upon. This information will help you get a possible range for digital marketing budgets. 

From the start, you can divide your marketing budgets among different digital marketing channels. However, you should consider the six factors we have given below before allocating marketing budgets. 

1. Think about your company’s overall objectives 

Before starting your marketing budgets allocation, you must think about your company’s objectives and goals. Determine what are the objectives that the company aims to achieve through marketing. Have a look at marketing strategy goals for the next quarter and the annual year. Take note of the priorities that you need to set up for digital marketing. 

Based on this information, you can effectively allocate marketing budgets to the different digital marketing channels. Let’s take an example of an eCommerce business online marketing budget allocation. Suppose, they need to perform the marketing activities given below throughout the year.

• Set a marketing strategy to strengthen the brand image and acquire new leads.
• Promote a new product launch at the end of the half year. Create brand awareness and generate leads.
• Also, talent acquisition will be done after the product launch. You need to put hiring ads on search and social media channels.

Here, for allocating marketing budgets for digital marketing, you need to plan to meet these objectives. The best way is to split the budget between time-specific and ongoing marketing activities. 

First, you can determine how much marketing budget the ongoing marketing activities need on average. Remember, don’t keep your marketing budget too tight, leave some funds for any sudden needs or charges. 

2. Implement the best strategies to meet the business goals

Mostly the digital marketing goals are focused on brand awareness, lead generation, and driving sales. But how can you measure your success in these goals? The best way is by tracking the right metrics. 

For example, you can measure your brand awareness through impressions, unique visits, and social engagement. Lead generation can be measured by the number of sign-ups, and newsletter subscriptions. The sales strategy effectiveness can be measured by the number of orders, average order value, etc. 

By measuring the relevant marketing metrics, you can evaluate the effectiveness of your marketing strategy. For advertising budget allocation, you should consider the key goals of your company. 

For example, if your company’s immediate short-term goal is to drive sales, you can allocate more budget on the strategies to drive sales. However, if your company is well-established and driving sales easily but wants to improve its brand image, you can allocate more budget to brand-building strategies. 

Depending on the priority of goals for your company, you can decide on the marketing budgets accordingly. 

3. Evaluate campaigns’ performance for detailed insights

Once you have goals and expectations, the next step is to measure your campaign’s performance and use insights to guide your future campaigns. Try different digital marketing strategies and tactics to analyze the results driven by them. This helps you to allocate your marketing budgets to the strategies that contribute to success.

Track your campaigns’ performance regularly to know about the underperforming campaigns and to pause them priorly. However, remember you can experiment with various channels and targeting options. If a strategy didn’t deliver the expected results, you can run experiments with different creatives and assets. 

Find what works for your business and focus your efforts in that direction. Conduct experiments and track performance to ensure that your progress goes upward. This way you can make sure you don’t spend your marketing budget on unnecessary resources. 

4. Determine the marketing budgets allocation by channel  

You’ve decided your business goals and now it’s time for marketing budgets allocation by channel. However, remember that there’s no one single channel best for digital marketing. The best channel for digital marketing varies across industries, target customers, and company sizes. It also depends on the goals you aim to achieve through digital marketing. 

For example, a large business that has an eCommerce website for selling apparel needs a strong omnichannel marketing strategy. Using various digital marketing channels like LinkedIn, Facebook, Instagram, YouTube, and search engine marketing can be a good way. However, for a small business that sells handicraft products, Instagram and YouTube can be the right channels. They can reach a large audience with a limited budget. 

The best way to choose the right digital marketing channels for your business is by understanding your customers better. You can build buyer personas and analyze customer behavior data. This will guide you in the marketing budgets allocation by channel as you’ll get to know the channels where they’re most active.  

5. Try to estimate all marketing costs 

Many times digital marketers keep their focus on advertising costs and forget about the other related marketing costs such as content marketing costs. Later, when these allied costs come up, marketers have to increase their marketing budgets. 

You must ensure marketing expenditures allocated carefully so that you have a clear idea of the marketing budget. Some of the common marketing costs that you must consider are as follows:

• Hiring full-time digital marketing team cost.
• Payment to agencies or any freelancers hired.
• Different tools and technologies your team requires such as social media post scheduling, video & designing tools, etc.
• Website or app development costs.
• Marketing analytics and research costs.

Try to estimate all marketing costs before allocating marketing budgets to different channels. You can take past miscellaneous costs into consideration for a rough idea of your current budget. 

6. Make adjustments based on ROI

Digital marketing is unpredictable and you never know what turns viral. You can have a marketing plan set but you can’t be sure if it will be successful or not. Once your campaigns are launched, start with calculations and analysis. Your marketing plan’s actual performance can be better or worse than your expectations. But if it’s not going in the direction you want, you can make changes accordingly. You must plan your budget in such a way that there’s room for flexibility. 

If a campaign or channel is continuously failing to deliver results, you can pause it and reallocate your budget to other channels. Similarly, if a channel is performing well and delivering better results, you can invest more budget into that. Ask stakeholders to provide more budget for those channels. For instance, if they can’t provide a higher budget, you can plan and shuffle the existing budget from underperforming campaigns to high-performing campaigns. 

Best tips for making the most out of your marketing budget 

In this section, we will give you the best tips for making the most out of your marketing budget. Marketing budgets allocation can be a difficult task but you can make it easier by following the easy steps and tips given in this blog. 

1. Understand your customer journey

A customer’s journey from awareness to the final decision stage is a complex one. You should try to understand how customers go from awareness to purchase decision. Try to conduct comprehensive research to get answers to the following questions:

• On which platforms your maximum target audience is available?
• What channels your customers are most active in?
• What are their pain points and barriers to success?
• What messages can help them push ahead in the journey?
• Which creatives can perform the best for entertaining and educating them?

By understanding your customer journey, you can find the right marketing channels to reach your target audience. You can put your marketing budgets in the channels that provide the highest ROI. 

2. Hire a marketing agency if needed 

Planning, creating, and analyzing marketing campaigns can be a difficult task even if you have an in-house team. Additionally, you need to invest time and effort into hiring and training employees. This can be a lot to handle if you don’t have an ample budget and time to supervise teams. The best option in this case would be to hire a marketing agency.  

Hiring a marketing agency can be cheaper than recruiting a marketing team in-house. A marketing agency can act as an extended arm of your business. By partnering with a marketing agency, you can get access to experts and professionals that help you achieve your business goals. 

3. Content repurposing and updating 

Creating unique and valuable content for your different marketing strategies is a cumbersome task. There are distinct types of content that you must be creating for your company every day like articles or blogs. You can use these assets in your marketing strategy by repurposing and promoting them in multiple content formats. 

You can also update your previously posted blogs with added information. This revamping activity can make your content go up in the SERPs. You can also repurpose and utilize your user-generated content. For example, you can take the positive reviews of your real customers and create a post out of them. This way you can save up your marketing budgets and maximize results from the available resources. 

4. Discard your underperforming channels 

Analyzing and understanding which marketing channels are driving the highest revenue is important for marketing budgets allocation. You should constantly assess your marketing campaigns and find out which marketing channels are underperforming. This information will help you optimize your marketing spend in the right direction. 

Well, you never know if your underperforming channels start doing better in the future. Therefore, it’s suggested to follow the 70-20-10 rule. According to this rule, 70% of your marketing budget goes into well-performing strategies, 20% in new strategies, and 10% in underperforming strategies. 

5. Refine your marketing strategy 

A good marketing strategy is one which has objectives & goals and follows the SMART framework. Implementing a SMART framework can help you track progress and identify marketing channels & campaigns that work. You must constantly review and analyze your marketing strategy to find ways to optimize it. 

By keeping track of various metrics, you can see which marketing tactics are delivering results. This way you can cut down your marketing budgets invested in the wrong marketing channels. You can decide to increase or decrease your costs on various ad campaigns based on performance. Refine your marketing strategy constantly to avoid wasting money on underperforming channels and campaigns.

Marketing budgets: The conclusion 

Allocating marketing budgets is a difficult task for any business. However, the best way to go about it is by understanding customers better. You should see which marketing channels are most preferred by your customers. Reaching your customers where they are can help you increase the chances of conversions and boost revenue. But how can you determine which marketing channels are delivering the best results? 

WebMaxy eGrowth is an advanced customer data platform that can help you evaluate your marketing channels’ performance. It comes with Marketing insights feature that enables you to analyze the conversions and revenue contribution of different marketing channels. You can see which marketing campaigns are performing the best and worst. Then, you can make your marketing investments accordingly. 

You can use a multi-touch attribution model to evaluate the performance of marketing channels. This in-depth analysis can help you to make the right marketing decisions. WebMaxy eGrowth comes with a wide range of features such as a KPI dashboard, customer segmentation, marketing insights, marketing workflows, social campaigns, email marketing, WhatsApp marketing, customer loyalty, help desk, and retargeting.

Schedule a demo with our experts to learn more about WebMaxy eGrowth or email us at [email protected]. 

Want to analyze marketing channels’ performance?

Take a WebMaxy eGrowth trial today!

Sign Up!

Marketing budgets FAQs

How to allocate marketing budgets across channels?

Allocating marketing budgets is an important task for marketers. You can allocate your marketing budgets across different channels by following the steps given below: 

– Set goals and objectives

– Evaluate your past efforts 

– Do competitor analysis

– Determine which channels are the best & allocate budget accordingly 

– Refine your marketing strategy 

How do you organize a marketing budget?

Marketing is a vital part of any business. Therefore, it’s important to allocate the marketing budget to the right resources. You can organize a marketing budget by following the steps mentioned below:

– Define your business objectives 

– Determine your current marketing spend

– Measure the ROAS of your current marketing channels

– Evaluate and optimize your marketing efforts

What are the three marketing budget techniques?

Determining the right marketing budgets is important to conduct marketing effectively. We have given below the three marketing budget techniques that you can utilize. 

– Percentage of sales method 

– Objective and task method 

– Competitive parity method

What is a typical marketing budget to revenue?

A marketing budget typically ranges from 5 to 25 percent of a company’s revenue. It depends on several factors such as industry, company size, stage of growth, etc. Usually, B2C companies spend more on marketing budgets than B2B companies. Also, smaller companies that have just started tend to spend more on marketing than well-established companies.

How does marketing research help companies make better use of their marketing budgets?

Marketing research helps companies know which marketing channels are successful in reaching, engaging, and converting customers. They can analyze which marketing channels are bringing the most sales and driving the highest revenue. Based on this information, they can make investments in the right marketing channels and increase ROAS. WebMaxy eGrowth Marketing insights feature can help you conduct comprehensive market research.

Where should you allocate the majority of your paid media budget?

You should allocate the majority of your paid media budget to the channels that contribute the most to sales and revenue. According to the 70-20-10 rule, you should allocate 70% of your marketing budget to the best-performing channels, 20% in new strategies, and 10% in underperforming channels.