Irrespective of the type of business you run, you cannot undermine the importance of strategic business marketing. For newly established online stores, marketing the brand to the target audience can bring in the first few sales. For larger enterprises, it can help drive the business flywheel to attract, retain, and delight their customers.
But when it comes to specifying the amount to be invested in different marketing efforts, how much is just not enough – or too much?
The same question can have different answers depending on what you sell, how you sell it, and to whom. Ultimately, business marketing is about achieving new levels of growth while adhering to a strict budget. That is why it is important for you to understand the concept of marketing budget in and out before you start launching campaigns.
A marketing budget, as the name suggests, covers the exact amount you need to allocate for marketing communications aligned with business goals and delivers the highest ROI.
Here, we will explore:
- Marketing budget definition and importance
- Marketing budget as a percentage of revenue
- Marketing budget by industry
- How to calculate a marketing budget for your business
Marketing Budget Definition and Importance
A marketing budget refers to the outline that details the amount you need to spend on your marketing strategy. It clearly answers where you should invest the funds to market your business, how much to be invested across channels, why, and for whom. As a part of the overall business marketing plan, it helps in allocating funds to achieve different objectives.
In the current competitive landscape, marketing budget cuts are quite common and underperforming marketing strategies often fall under the axe. A comprehensive marketing budget can be your silver bullet to avoid such outcomes. Without a proper budget by your side, it is easy to lose sight of where your marketing funds are going, hence making you run out of funds just when you need them the most.
Defining a marketing budget will also help you with:
- Allocating funds for campaigns well in advance
- Prioritizing projects to be marketed
- Comparing year-on-year performance
- Justifying the value of your marketing plans
- Calculating the ROI of your business marketing efforts
- Allocate funds for full-time hires and marketing freelancers
If you are quite aware of the worldwide business statistics, you might have heard that marketing will cover around 13.6% of an organization’s total budget in 2023 (Source). Wondering if it refers to your business or industry? Let’s find out.
Interesting Read: Take Digital Marketing Strategy Ahead with Paytm Ads
Marketing Budget as a Percentage of Revenue
If you look at the numbers related to marketing budget over the last decade, the percentage of revenue businesses allocate to marketing has grown considerably, as covered in the following table:
| Types of business/industry | Marketing budget |
| B2B product industries | 7.8% of total revenue |
| B2C services | 6.5% of total revenue |
| B2B services | 5.9% of total revenue |
| B2C product | 15.1% of total revenue |
| Average | 8.7% |
Source: The CMO Report | |
Since marketing budget allocation also varies as per industry type, let’s dive even deeper to obtain more accurate insights.
Marketing Budget by Industry
The following table represents the allocation of marketing as per industry as determined by Deloitte Survey:
| Industry | Marketing budget as a % of company revenue |
| BFSI and real estate | 8% |
| Consumer packaged goods | 9% |
| Communications media | 10% |
| Education | 3% |
| Consumer services | 6% |
| Energy | 1% |
| Healthcare | 18% |
| Mining and construction | 3% |
| Manufacturing | 13% |
| Service consulting | 21% |
| Technology | 21% |
You can use these percentages as a benchmark to allocate your marketing budget. In case an industry is reluctant to spend more on marketing campaigns, you can use the lower benchmark as an opportunity for your business to shine forth. This will also make your brand a reference for others to indulge in business marketing.
Interesting Read: The Ultimate Guide to Paid Advertising in 2023
Marketing Budget Example
Let’s assume your organization has a marketing budget of Rs. 1,00,000 per month. In general, the allocation of this budget may look like:
- Rs. 10,000 allocated toward a CRM or other business software
- Rs. 10,000 allocated to social media marketing (this can be further categorized based on channel performance and relevance)
- Rs. 20,000 allocated toward paid search engine marketing campaigns
- Rs. 20,000 allocated toward marketing a new product, service, or feature to be tested
- Rs. 15,000 allocated toward sponsored content
- Rs. 10,000 allocated toward SEO
- Rs. 15,000 allocated toward content marketing
How to Calculate a Marketing Budget for Your Business?
Determine your target audience
Your target audience covers the ideal customers whom you want to attract to your services or products through marketing efforts. Moreover, the journey of an ideal customer is not as simple as googling your brand but is full of twists and turns.
That is why you should be specific about your target audience before calculating the marketing budget. Look at the customers’ common characteristics, age, gender, interests, pain points, and expectations. This will help you find out:
- Who are your most profitable customers?
- What would the target customer like about your offerings?
- Why should customers choose you over your competitors?
- What can motivate them to continue buying from you?
Research your competition
Once you have a clear picture of your target customers in mind, spend some more time researching how other brands/your competitors market to them. In fact, competition is not always something to worry about as it can help you learn how you should market your products. On the flip side, you will also get to know about their failed marketing strategies that you need not try your hands on.
This will also help you understand the competitors’ tactics to market their brands, the frequency at which they release new campaigns, and much more. Ultimately, this will give you a fair estimate of the required marketing budget.
Identify your marketing goals
Now, you need to work on defining your marketing goals, which can be like:
- Building brand awareness through social media advertising
- Increasing organic traffic with the help of content marketing
- Invest in Instagram marketing to improve the click-through rate
- Expand your target audience base to sell more
- Increase the number of free trials with PPC ads, etc.
Once you have made this list, prioritize them as per their impact and settle on a corresponding marketing budget. In the meantime, you should also learn how the customer journey varies from product awareness to purchase across industries.
Select the right market channels
The next important thing is about selecting marketing channels that your team will use to accomplish various marketing goals. Some of the potential channels include:
- YouTube
- Events
- Podcasts, etc.
The selection of these channels should be based on your understanding of where your target audience spends their time. For each channel you select, you need to dive deeper to find out the marketing costs and potential ROI. For example, if Facebook is the most preferred channel where your prospects stay active, you can invest in Facebook ads and boost posts you submit on your page to increase your brand’s reach.
Keep in mind that you do not always need an exact number here to create your marketing budget. Just an estimate of the cost involved for different channels would do good.
Re-evaluate your marketing budget and strategy constantly
Every marketing strategy has certain objectives and key results, which are important for marketing budget optimization. These goals and metrics can help you track progress and identify channels/types of campaigns that work.
By constantly reviewing your marketing strategy, you can better decide how and where you should spend your marketing budget. It will help you know when to pivot or stay the course. Regular reviews also help in reallocating the budget to high-performing campaigns, cutting unnecessary spending, and varying the variable costs involved like ad spend.
Manage Your Marketing Budget Effectively with Paytm Ads
Now that you know what a marketing budget is and how to calculate it, it’s time to get into the action and use Paytm Ads. By advertising on Paytm, you can reach 300 million+ users and 20 million+ merchants.
FAQs
How to calculate your marketing budget?
To calculate the budget effectively, you need to consider customer goals and revenue, calculate average cost per lead and average conversion rate to make an informed decision.
What is the purpose of a marketing budget?
The marketing budget you select determines the effectiveness of different marketing components – SEM, SEO, content marketing, etc. It breaks down the exact amount to be spent in different relevant marketing channels.
How is a marketing budget divided?
A marketing budget is largely split into two categories or objectives:
- Lead generation and awareness to attract new customers
- Retention and loyalty for the existing customers
You can then rank different marketing channels based on your business-specific requirements.
What does a successful marketing budget look like?
In simple terms, a marketing budget should be a percentage of the overall revenue. A common rule of thumb says B2C companies spend 5-10% of their revenue for marketing while B2B companies restrict their marketing budget to around 2-5%.
