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In the marketing world, there are two approaches to setting marketing budgets. The first involves deciding to implement a specific tactic or program, and subsequently determining how much budget is required. The other is having a predetermined budget and figuring out how to utilize it most effectively.

While both approaches have their merits, my personal experience has led me to favor the latter approach. Operating from a budget-first position empowers marketers to strategically maximize their marketing investment. This method of budget-setting can not only elevate your marketing plan but can also transform your business.

Graphic depiction of money resulting in a diverse marketing campaign

Budget-First: Why it Works

Adopting a budget-first strategy comes with a multitude of advantages. First, and perhaps most importantly, it urges marketers to step back, prioritize their objectives, and allocate their resources in ways that most efficiently support their goals. This, in turn, increases the likelihood of executing a marketing strategy that significantly impacts the business.

Flexibility is another benefit. If a budget is allocated specifically for a particular tactic and it underperforms, it can be challenging to reallocate resources. However, a budget-first approach allows for quick pivots and adjustments as needed, making your strategy agile and more responsive to ever-changing market conditions.

Despite the clear benefits, many marketers avoid the budget-first approach due to uncertainty about what their spending limit should be. So, how do you calculate an optimal marketing budget?

Setting an Effective Marketing Budget

Determining the ideal marketing budget is not a one-size-fits-all process. It varies significantly from one company to another, based on factors such as your target audience, company size, and industry type. As a general rule of thumb, B2B marketing budgets are usually lower than those of B2C businesses.

Fortunately, there are a wealth of resources available to provide benchmarking data. Gartner, for instance, conducts an annual CMO survey and releases a comprehensive report on the State of Marketing Budget and Strategy. This year's report revealed that, on average, marketing budgets across all industries represent about 9.1% of total revenue.

In addition, the CMO Survey also offers invaluable insights and an alternate point of view. In a slight departure from Gartner’s results, their 2023 survey discovered that the average marketing budget accounted for 10.9% of a company's total revenue.

Illustration of a magnifying glass over a budget statement

What is Included in a Marketing Budget?

When calculating a marketing budget, it's crucial to think through the various expenses. The major components typically include expenses like salaries, software investments, agency and consultant fees, and the hard costs of media and material production.

Navigating the complexities of marketing investments can be challenging, but adopting a budget-first approach can simplify the process. Being strategic about your budget allocation can facilitate a robust, flexible marketing plan that drives your business to new heights.

FAQs: Strategic Marketing Budget Planning

1. How much should I spend on marketing?
There’s no magic percentage that works for every business. Your budget should be built from your goals, target audience, and expected outcomes—not just an arbitrary % of sales.

2. What’s wrong with using a fixed marketing budget percentage of sales?
It ignores your unique growth stage, market conditions, and objectives. A flat formula can either underspend when you need growth or overspend without a clear return.

3. How do I set a marketing budget strategically?
Start with your business goals, define the campaigns and channels needed to reach them, and assign costs to each. This approach ties every dollar to a purpose and a measurable outcome.

4. Should my marketing budget change year to year?
Yes—budgets should adapt to shifts in strategy, competition, and customer behavior. What worked last year may not deliver the same ROI this year.

5. How do I know if my marketing spend is paying off?
Track KPIs tied to your goals, like lead volume, conversion rate, or brand awareness growth. Measure results regularly so you can adjust spend where it’s most effective.

6. What factors influence how much I should spend on marketing?
Your industry, competition, growth targets, sales cycle length, and customer acquisition costs all play a role. These factors matter more than a one-size-fits-all benchmark.

7. How do I balance short-term wins with long-term brand growth in my budget?
Allocate funds for both quick-response campaigns and sustained brand-building. A healthy mix keeps revenue flowing now while creating demand for the future.

8. Can a small budget still make a big impact?
Absolutely—when it’s focused. Prioritize high-ROI tactics, test messaging, and double down on what works instead of spreading spend too thin.

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