How to Create a Marketing Budget in 9 Steps (+ Free Template) (original) (raw)

What Is a Marketing Budget?

A marketing budget outlines the expenses a business plans to allocate toward marketing in a specific time frame. Budgets are typically established on an annual or quarterly basis.

The expenses detailed in a marketing budget may include the following:

How much you should spend on marketing depends on a range of factors, including:

Download our free marketing budget template

How to Determine Your Marketing Budget

Common approaches include:

Let’s consider each method.

Marketing Budget as a Percentage of Revenue or Overall Budget

In this method, you allocate a set percentage of your total revenue or overall budget to marketing expenses.

In 2023, the average marketing budget was 9.1%of total revenue, according to Gartner’s CMO Spend and Strategy Survey.

2023 Marketing Budget as a Percent of Total Revenue (2019-2023)

2023 Marketing Budget as a Percent of Total Revenue (2019-2023)

Image Source: Gartner

Your marketing budget will be influenced by various factors. Like your company’s growth stage. And industry.

For example, consumer packaged goods companies allocated an average of 22.61% of their overall budgets to marketing in 2023. For mining and construction companies, that percentage dropped to 3.75%.

This Statista graph shows various industries’ average marketing expenses as a percentage of overall budget:

Statista graph showing various industries’ average marketing expenses as a percentage of overall budget

Image Source: Statista

Marketing Budget Informed by Industry Benchmarks

In this method, you research what other businesses in your industry or niche spend on marketing. This information informs your marketing budget allocation.

Every industry has marketing norms. And benchmarks. Some industries dedicate a larger portion of their overall budget to marketing than others. Similarly, the distribution of marketing budgets across various channels will vary from industry to industry.

The data in the table below shows the average marketing budget by industry, based on CMO Survey data.

Average marketing budget, as percentage of company revenue, by industry: banking, finance, insurance, and real estate is 8%; communications media is 10%, consumer packaged goods 9%, consumer services 6%, education 3%, energy 1%, healthcare 18%, manufacturing 13%, mining and construction 3%, retail wholesale, 14%, service consulting 21%, technology 21%, transportation 6%.

Useful industry benchmarks include:

Where can you find this information?

Marketing Budget Driven by Business Goals

Start with the business outcomes you want to achieve through marketing. And work backwards from there.

For example:

You set a goal to acquire 100 new customers using a specific channel. To calculate how much you need to budget for marketing to reach this goal, you first need to know how much it costs to acquire one new customer.

Then, multiply that number by the number of new customers (100). And add fixed marketing costs. Like payroll and software.

If your customer acquisition cost is 250percustomer,andyourfixedmarketingcostsamountto250 per customer, and your fixed marketing costs amount to 250percustomer,andyourfixedmarketingcostsamountto13,000, the equation would look like this:

($250 x 100) + 13,000=13,000 = 13,000=38,000

To reach your customer acquisition goal, you’d budget $38,000 for this marketing campaign.

Repeat this process for each marketing goal. Whether you want to grow your following on social media, increase organic traffic to your website, or drive product demo signups.

This is only a guideline. To establish your marketing budget, consider your business numbers and goals.

Marketing Budget Examples

Sometimes, the fastest way to learn is by example.

Sample Marketing Budget for a Small Business

Sample Startup Marketing Budget

Sample B2B Marketing Budget

Common Marketing Costs

Marketing costs refer to all the expenses involved in promoting a brand, product(s), or service(s), such as the following:

Basically, it's all the money you spend to get the word out about your business. And attract new customers.

The key to staying within your budget is paying attention to the details. It’s also a good idea to build some flexibility into your budget. To account for unexpected expenses.

Common marketing costs are seo, software, freelancers, branding, research, gifts, automation, social media, sales collateral, design, influencers, affiliates, public relations, travel, events, agencies, website, communications, content, video, and advertising

Paid advertising costs include the expenses associated with advertising.

Paid media accounted for 25.6% of marketing budgets in 2023, according to Gartner’s report.

Paid advertising includes traditional advertising media**.** And online paid advertising opportunities.

Examples include:

Paid advertising costs are not just placement fees. Factor in the costs of creating content, managing the campaigns, and budgeting for ads that vary by engagement. Such as cost-per-click (CPC) and pay-per-click (PPC) models.

Payroll and New Employees

Labor typically accounts for 24.6% of a CMO’s budget. Agencies and services make up 23.3%, according to the Gartner CMO survey.

Gartner CMO survey data showing investments in marketing's major resource areas

Image Source: Gartner

Marketing talent costs include payroll. And benefits like raises and bonuses for marketing staff. And recruitment costs involved in hiring new employees.

Marketing talent includes:

New marketing hires come with additional costs. Like recruiting, onboarding, and training. And equipment and software licenses or “seats.”

Freelancers and Agencies

In-house, agency partner, or freelancer? This is a question you’ll likely face when establishing and updating your marketing budget.

Currently, 20.2% of marketing tasks are outsourced. This number is expected to increase by 5% within the next year.

CMO Survey data showing statistics for companies that are outsourcing marketing activities to outside agencies, vendors, and partners

Image Source: The CMO Survey

Many marketers hire outside help. Like freelancers, agencies, and other vendors. Outsourcing has its pros and cons. Some of which we’ve listed below.

Pros:

Cons:

Marketing Software

Marketing software covers a wide range of tools. To plan, create, manage, and track marketing campaigns.

To name a few:

Before you invest in any marketing software, learn about each tool's features. And read reviews and customer testimonials.

Content Creation

Content creation costs overlap considerably with talent, outsourcing, and even software costs. And content creation is often the most expensive part.

Aside from the cost of hiring professional creatives, content costs include all the materials, tools, equipment, software, resources, and other incidental expenses involved in creating marketing collateral.

To give you an idea of content marketing costs, here are some statistics:

Survey data showing how much of total marketing budget companies spend on content marketing

Where Are Marketers Focusing Their Marketing Spend?

In 2023, CMOs planned to increase investments in the following categories:

Change in Investments for Digital Channels in 2023 (Percentage of Respondents)

Change in Investments for Digital Channels in 2023 (Percentage of Respondents)

Image Source: Gartner

Increasing investment in social media, digital video, and influencer marketing makes sense. Considering the popularity of video-based social channels like TikTok, YouTube, and Instagram Reels.

You might not shift your budget to new channels right away. But it can help steer your marketing strategy in the long term. And help you choose where to start experimenting.

Download our free marketing budget template

How to Develop a Marketing Budget

1. Define Your Marketing Goals

With clearly defined objectives, you can identify which channels and tactics to prioritize.

From there, it’s much easier to calculate the costs involved. And estimate your return on investment (ROI). So you can allocate funds where they’ll have the most impact.

The SMART goals framework offers a simple approach to creating clear, achievable goals.

SMART Goal Setting Objectives

For example, say your goal is to increase website traffic.

Here’s how to turn that into a SMART goal:

SMART goals help you budget because you know exactly what you want to achieve. And when. They keep you focused. And ensure you're not just going through the motions. But making real progress.

2. Understand Your Audience

Successful marketing hinges on knowing your ideal customers inside out. And targeting them with laser-like focus.

Understand your target audience by creating detailed buyer personas. The more you know about your ideal buyer, the less guesswork marketing involves. And the more efficiently you can allocate your marketing budget.

A buyer persona is a hypothetical customer profile that represents a segment of your audience. Buyer personas reflect your target customers’ behavior, motivations, preferences, and problems. And how your business solves them.

To create your buyer personas, start by gathering data about your current and prospective customers. Use surveys, interviews, and data from Google Analytics. And other platforms.

Look for patterns that reveal their motivations. And pain points. It’s a lot easier to sell a product when you know exactly who you’re talking to. And which of their needs your offer addresses.

Once you have useful insights, create three-to-five personas. If you try to cast the net too wide, your messaging will not be specific enough to be relatable.

Next, add demographic and psychographic data.

Include the following:

Prefer to use a template? Use the Semrush Persona tool for free.

Select a person who looks like one of your (potential) customers. Click “More Photos” below the images if none of the initial options feel right.

Personas templates in Semrush Persona tool

Once you select a photo, choose one of three templates:

Click on the template you’d like to use.

"User persona template" selected in Semrush Persona tool

Fill out the template with details describing your hypothetical customer.

Empty user persona template in Semrush Persona tool

Next, add demographic information. Like age, location, education level, and income level. Complete the sections in any order.

Upload a different photo if you prefer. Here’s an example of a completed persona:

Completed user persona template in Semrush Persona tool

Remember, the more specific your customer personas, the easier it is to connect with your audience. And help ensure you use your marketing budget effectively.

3. Determine Monthly Expenses

It’s a good idea to understand how much you spend just to operate the business. Before you decide how much money to allocate to future marketing projects.

Review your historic monthly marketing spend. Taking into account ongoing expenses like:

The idea is to arrive at a baseline. That can serve as your minimum monthly budget for marketing. Don’t forget to build in a buffer for unexpected costs. Or opportunities.

4. Research the Competition

Taking inspiration from your competitors’ marketing efforts can help guide your own marketing strategy. And budget.

Learn from their successful campaigns. And identify gaps in their strategy.

Use the following tools to analyze your competitors’ marketing tactics. And expenditures.

For example, use Organic Rankings to view details about your competitors' ranking keywords, website traffic, traffic cost, and more.

Organic Rankings tool showing data for competitors' ranking keywords, website traffic, traffic cost, and more

Drill down into the data to discover exactly which keywords they’re ranking for (and which in positions). Identify their top pages, track position changes, and explore which SERP Features are boosting their search visibility.

Organic Rankings tool showing data for competitors' top keywords, keywords by intent, position changes, and position changes in SERP features

5. Audit Past Marketing Performance

Analyze data from previous marketing campaigns to identify which channels, tactics, and campaigns were most (and least) cost-effective. At feeding your sales funnel.

Here are some marketing metrics to explore:

The more you drill down into your marketing data, the more insight you’ll gain into precisely why a specific tactic worked. This, in turn, makes it easier to create successful campaigns in the future.

Further reading: Top 50 Marketing KPIs for Businesses and Agencies

6. Use a Marketing Budget Template

Start with a budget template that provides guidelines by dividing your potential marketing expenses into categories.

To better understand the types of expenses to anticipate. And budget for. Plus, it’s much easier and faster to fill out a template than start with a blank spreadsheet.

Free Marketing Budget Template

Use our free, comprehensive marketing budget template as a starting point. And customize to meet your needs.

Get our free marketing budget template here.

Each budget sheet is divided into subsections so you can organize your expenses by category. Like “software,” “content creation,” and “distribution.”

Get as granular as you want when planning your budget.

Semrush's free marketing budget template

Each line item includes a field for “Projected Spend” and “Actual Spend.” So you can easily monitor your budget at a glance.

The template includes a built-in marketing budget calculator that automatically adds up your totals as you input numbers. And make updates.

Our template also features separate tabs you can use for individual channels, categories, or campaigns. For example, you might use the template to create a “master budget” for video advertising as a channel.

And use additional tabs to create production and promotion budgets. For each individual video.

7. Allocate Your Marketing Spend

A common way to distribute marketing spend is by following the 70-20-10 rule.

This means allocating:

Channel budget distribution visualisation, following the 70-20-10 rule.

For example, your digital marketing budget might account for 70% of your spending. While 20% goes to traditional advertising channels.

The final 10% might be allocated to something like ordering custom company swag (merchandise).

8. Choose Your Marketing Channels Wisely

Prioritizing the right channels is a key part of your marketing budget. When we say “channel,” we mean every medium that can be used to create an audience touchpoint. Not just different social media platforms.

Examples of marketing channels include

How much of your marketing budget should you allocate to each channel?

It depends on which channels offer the best potential ROI. For your particular business.

Some factors to consider include

9. Measure Performance and Calculate ROI

To find out whether your marketing is successful, track performance. And calculate the ROI.

Knowing which channels, tactics, and campaigns offer the highest ROI enables you to fine-tune your budget allocations.

It’s easier to calculate ROI from some channels and campaigns than others. For instance, paid search advertising with a clear cost-per-click makes it easy to compare campaign costs to total sales revenue.

On the other hand, it can be a challenge to calculate marketing ROI when you can’t always attribute sales or conversions to an individual campaign. Or touchpoint.

However, there are a couple of formulas you can use. To get an estimate of your marketing ROI.

Simple Marketing ROI Calculation

This formula assumes that all revenue growth is the result of marketing investment.

((Revenue growth - marketing costs) / Marketing costs) x 100 = ROI %

Example: A company spends 5,000onmarketing.Andsees5,000 on marketing. And sees 5,000onmarketing.Andsees20,000 in revenue growth.

(($20,000 revenue growth - <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mn>5</mn><mo separator="true">,</mo><mn>000</mn><mi>m</mi><mi>a</mi><mi>r</mi><mi>k</mi><mi>e</mi><mi>t</mi><mi>i</mi><mi>n</mi><mi>g</mi><mi>c</mi><mi>o</mi><mi>s</mi><mi>t</mi><mi>s</mi><mo stretchy="false">)</mo><mi mathvariant="normal">/</mi></mrow><annotation encoding="application/x-tex">5,000 marketing costs) / </annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:1em;vertical-align:-0.25em;"></span><span class="mord">5</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">000</span><span class="mord mathnormal">ma</span><span class="mord mathnormal" style="margin-right:0.02778em;">r</span><span class="mord mathnormal" style="margin-right:0.03148em;">k</span><span class="mord mathnormal">e</span><span class="mord mathnormal">t</span><span class="mord mathnormal">in</span><span class="mord mathnormal" style="margin-right:0.03588em;">g</span><span class="mord mathnormal">cos</span><span class="mord mathnormal">t</span><span class="mord mathnormal">s</span><span class="mclose">)</span><span class="mord">/</span></span></span></span>5,000) x 100 = 300% ROI

This method is unlikely to give you an accurate idea of your marketing ROI. Unless marketing is directly responsible forall of your revenue growth.

This is rare but could apply to you if your business is brand new. Or your business model relies entirely on paid advertising. And all your sales are directly attributable to ad spend (e.g., dropshipping).

ROI Calculation Accounting for Organic Revenue Growth

This formula aims to get a more accurate ROI by first subtracting your average organic revenue growth from total revenue growth. This average growth average is calculated based on the existing sales trend in the months leading up to a new marketing campaign.

((Revenue growth - average organic revenue growth - campaign cost) / Marketing costs) x 100 = ROI %

Example: A company with a historic average organic revenue growth of 6% launches a 5,000adcampaign.Andsees5,000 ad campaign. And sees 5,000adcampaign.Andsees20,000 in revenue growth.

(($20,000 revenue growth - 6% of <span class="katex"><span class="katex-mathml"><math xmlns="http://www.w3.org/1998/Math/MathML"><semantics><mrow><mn>20</mn><mo separator="true">,</mo><mn>000</mn><mo>−</mo></mrow><annotation encoding="application/x-tex">20,000 - </annotation></semantics></math></span><span class="katex-html" aria-hidden="true"><span class="base"><span class="strut" style="height:0.8389em;vertical-align:-0.1944em;"></span><span class="mord">20</span><span class="mpunct">,</span><span class="mspace" style="margin-right:0.1667em;"></span><span class="mord">000</span><span class="mord">−</span></span></span></span>5,000 campaign cost) / $5,000) x 100 = 276% ROI

This method offers a more accurate ROI than the first formula.

As you can imagine, such calculations become much more complex when you account for multiple campaigns. And channels.

Not to mention the long-term returns resulting from investments in evergreen content and SEO.

Further reading: Learn more about calculating content marketing ROI or SEO ROI.

Stretch Your Marketing Dollars with Semrush

Setting a realistic and effective marketing budget starts with knowing your goals. And understanding your audience.

Once you’ve completed these steps, download our free marketing budget template. To allocate marketing spend. And measure performance throughout the year.

Use Semrush’s tools, like Keyword Magic and Advertising Research, to get maximum mileage out of your marketing budget. And make your marketing strategy a success.

Whether it’s market research, SEO strategy, content marketing, paid advertising, or social media management, our tools deliver results. And stretch your marketing dollars further.