How Much Should You Budget on Marketing in 2021?
Creating an annual marketing budget is an essential task for every business. If you want your business to grow and thrive, you need to retain loyal customers and attract new customers who will hopefully become loyal customers. To accomplish this, you have to get the word out about the services and products you offer – and let people know why your company is the one they should choose. Without a sufficient marketing budget, you won’t be able to grow your business.
Being a successful marketer isn’t just about pitching exciting ideas and thinking strategically. It’s also about sticking to a budget, reaching new levels of growth, and choosing the most cost-effective option for your business.
In this article, we’ll look at typical marketing budgets – including marketing budgets by industry – so you can see how your budget matches up against your competitors. We’ll also explore how much of your yearly revenue you need to re-invest in marketing materials to see substantial long-term growth.
What’s a standard marketing budget percentage?
Deloitte’s annual CMO Survey reports that marketing budgets, as of February 2021, are about 11.7% of total the company-wide budget. This is still a record high over the last four years, but it’s a slight decrease from the 12.6% marketers saw in June 2020. Gartner’s 2020 CMO Survey supports that most marketing budgets are around 11% of the total company budget.
Your marketing budget depends on several factors – including industry, business needs, and company revenue performance – but these surveys provide a reasonable percentage of the amount to allocate for your marketing teams.
Depending on individual company goals, what channels/strategies marketing teams decide to invest in varies. Here are the top three budget priorities for most companies in 2020 – and these trends are predicted to continue beyond 2021.
- Web optimization – 73%
- Digital media and search – 65%
- Digital marketing – 57%
In recent years, marketers have reduced their marketing budgets for traditional advertising and increased their digital marketing budget. In 2020, the average company was expected to budget 45% of their total marketing budget to digital marketing.
What about the marketing budget as it relates to overall company revenue?
According to the U.S. Small Business Administration, businesses with revenue less than 5 million should designate 7 - 8 percent of total revenue to marketing – if your margins are in the 10 - 12 percent range.
The amount of revenue businesses allocate to marketing has steadily climbed over the last 10 years. Today, the average marketing percentage of revenue is around 13% - compared to 8% in 2011.
On average, B2B Product and B2C Services allocate about 10% of revenue to marketing. However, B2C Product designates around 18% of total revenue, and B2B Services allocates roughly 15%.
What is the marketing budget percentage by industry?
Of course, how much to spend on marketing is largely industry specific. The following percentages will help you compare your company’s overall marketing budget to the average:
- Consumer packaged goods – 24%
- Consumer services – 15%
- Tech Software/biotech – 15%
- Communications/media – 13%
- Mining/construction – 13%
- Service consulting – 12%
- Education – 11%
- Healthcare/pharmaceuticals – 10%
- Retail wholesale – 10%
- Banking/finance/insurance – 8%
- Transportation – 8%
- Manufacturing – 8%
- Energy – 4%
How much (and where) should a small business spend on marketing?
When looking at the marketing budget percentage model, 7 – 8 percent is a safe amount of your overall revenue that will steadily improve your company’s customer base.
SEO (search engine optimization) is one way a small business can make the most of a tight budget. You can also invest in PPC (pay-per-click advertising) for an affordable option to traditional marketing.
We understand that planning a marketing budget can be overwhelming. Our experienced team of digital marketers will get to know your business and create a custom marketing strategy that will fit your budget! We know how to use SEO, PPC, and other digital marketing strategies to grow your business and increase your revenue. Contact us today for a free consultation!