How Much Do Companies Spend On Marketing And Advertising?
How much do companies spend on marketing and advertising today? This is a question a lot of people are grappling with. In the wake of last year’s turbulent time, companies are looking for new ways to adapt to the new normal.
Therefore, if you are a business owner and you’re asking “ how much can my business spend on marketing and advertising?”, You’re already leaps and bounds beyond other business owners. This is because so many businesses fail to plan for the big picture. As a result, they don’t invest enough in their marketing.
Before delving into how much companies spend on their marketing and advertising budget, let’s define what we mean by marketing budget.
Table of Contents
- What is a Marketing Budget?
- Where Should You Spend Your Marketing and Advertising Budget?
- How to Calculate Your Marketing and Advertising Budget
- How to Allocate Your Marketing and Advertising Budget
- Conclusion
What is a Marketing Budget?
A marketing budget sets out all the money that a company plans to spend on marketing-related projects quarterly or annually. Basically, it can include expenses like a registered blog domain, paid ads, new marketing recruits, marketing automation software, and sponsored web content.
Where Should You Spend Your Marketing and Advertising Budget?
Ultimately, you should spend on marketing budget on activities that help you reach your goals. What are your business goals this year? Brand recognition? Revenue growth? These are all possible when you invest in marketing.
For example, let’s say you want to beat your competition with a certain SEO keyword. Your ultimate goal is to reach the top search results for that term. This, of course, brings more search traffic to your website. Consequently, this means that you should spend at least some of your marketing budget on SEO.
Here are some other suggestions to help you prioritize and focus on your marketing spend destinations:
Website Design and Optimization
Your website lays the groundwork for your digital presence – it is simply the face of your brand. Basically, he website ensures you can channel your traffic through SEO blog posts, social media accounts, ads, and email campaigns. For these reasons, we believe that the most important part of your digital marketing is a website.
Starting from scratch will require investing a fair amount of money into creating a functional website that can grow with your business. However, it depends on the size and functional need. Also, it’s highly important to hire a reputable and trusted web designer (regardless of how you build or update your website).
Social Media Marketing
Nowadays, over 97% of businesses use social media to promote their business and reach customers. Are you among the majority? If the answer is “NO”, then what are you waiting for?
Investing a portion of your marketing budget in organic social media marketing is a must today. You only need to ensure you spend what is reasonable for your budget.
Graphic Design and Branding
Humans are highly virtual creatures; we may not want to judge a book by its cover, however, we do it most of the time. Hence, this is why professional graphic design and branding are important. Branding makes people recognize your company. In other words, it speaks to your audience’s preferences and makes you stand out from your competition.
To summarize, quality branding is super important and should be a part of your marketing budget today.
Email Marketing and SMS
Email marketing campaigns are essential to your marketing funnel even though they may only be seen by your email list. The same is true of SMS marketing, which has an open rate of close to 100%.
With email marketing, you can nurture new leads, generate reviews, drive traffic to your website, among several others. Consequently, you can use the insights from your email to focus on your customers’ expectations and get more from what you spend on marketing.
Video Marketing
There is no doubt that video will continue to be the way of the future. The cool part of it – people prefer watching a video compared to written content. This simply means that you should start (if you haven’t started already) at least a little video marketing in 2021. Subsequently, you can use these videos to improve SEO, boost engagement in your social media channels, and any other marketing channels.
PPC and Social Media Advertising
If you have the resources, we recommend adding PPC (or pay-per-click) and social media advertising to your marketing budget. That being said, you need to have a solid budget to achieve this.
Search Engine Optimization (SEO)
This is another marketing strategy that is still going strong today. Therefore, should your business focus on SEO? Yes! This is what helps your website rank high in Google search results, maintain high visibility among new and existing customers, and gain organic traffic.
There are several ways you can improve your SEO. Some of them include:
- Writing SEO optimized content for your blog and website to generate traffic.
- Improving the functionality and UX issues on your website
- Making an SEO audit.
- Adding videos to your website
- Improving your domain authority by launching a link-building campaign for backlinks.
Blogs and Website Content
To gain customers’ time, money, and loyalty, you need to give them something of value first. Therefore, including content strategy in your marketing budget in the form of blogs and website copy is certainly a no-brainer. This will help give customers entertaining, educational, and useful information that they seek. It will also improve your SEO and ensure that your site visitors are coming back for more.
How to Calculate Your Marketing and Advertising Budget
If you don’t know where to start your marketing budget or how to calculate it, this guide is for you.
Use a Percentage of Gross Revenue
One of the biggest challenges businesses face is figuring out their marketing and advertising budget. Thus, this is where the percentage system comes into play.
The U.S. Small Business Administration recommends that if your business earns less than $5 million annually, you should only spend 7 to 8 percent of your total revenue on your marketing budget. If you make more than that annually, you can increase your budget up to 10 to 12 percent. Yes, that’s a large sum. For instance, a $400,000 business should spend $28,000 –$32,000 per year on marketing.
Plus, if you split your annual budget of $32,000, you’ll only spend about $ 2,600 a month on marketing. A decent amount of work can be done with such a budget – however, it doesn’t go super far, especially when you factor in email marketing, blogs, PPC, and other marketing channels.
Therefore, the reason why having and segmenting an annual marketing budget is important is to enable you to prioritize and focus on your major marketing channels.
Make In-depth Research on Your Industry and Competition
Your marketing budget is also based on digital marketing trends and your industry’s competitiveness. Do you want to distinguish your business from your crowd of competitors? Do you want to outrank a competitor in SEO? Either way, the only solution to catch up, keep up, and shine is to invest more. This takes us to our next point…
Prioritize and Focus
You probably can’t afford to be in every marketing channel unless you have an unlimited budget to spend on marketing. However, irrespective of your budget, you need to set your priorities straight by focusing on your business goals. Some of the questions you should ask include:
- Who is my target demographic? This is where you should be spending your marketing and advertising budget.
- What are my business major challenges? Most companies list generating leads and website traffic as their biggest challenges. It’s left for you to fathom these challenges and tackle them.
- What are our main business goals? You may be inspired to set your goals based on the challenges you uncovered when brainstorming.
- What we want to do versus what do we need ASAP? Your #1 priority should be a website. Furthermore, before delving into other marketing strategies, remember to prioritize needs ahead of wants.
- Where do our competitors spend their marketing budget? Ensure you pay attention to where your competitors spend their marketing budget. This will enable you to glean insights into the right place to focus your energy.
Your Resources Matters
Another key point to note is that your resources determine how much you spend on marketing. Do you have a team to write blogs, manage your social media platforms, run email marketing campaigns? You either need to hire someone to do this or you find time to do them yourself (and well). It all depends on your resources.
How to Allocate Your Marketing and Advertising Budget
Now that you understand how to calculate your marketing and advertising budget, it’s time to talk about how to allocate your budget.
Set Marketing Goals
Setting your marketing goals for the year is the first step towards marketing budget allocation. This will help you determine the best channels and strategies to employ, and how you can allocate money to them.
We recommend a minimum of three SMART goals with predefined indicators of success linked to each. Your SMART goals must be:
- Specific: Always include details in your goals and avoid ambiguity.
- Measurable: Make sure you can measure your progress toward your goals.
- Attainable: You may have ambitious goals, however, they must be realistically achievable.
- Relevant: Ensure your marketing goals are relevant to your overall business goals.
- Time-bound: To keep your business on track, always set a time limit for achieving your goals.
Know Your Needs
Before you start spending your marketing budget, you need to spend your time. In basic terms, you should already have a concrete understanding of what you want to achieve with your marketing budget. Are you hoping to gain new customers? Increase your sales revenue? Or boost customers’ engagement?
Consequently, knowing what you want with your budget will help you narrow the options to achieve them.
Determine The Advertising Channels To Use
You need to determine the best advertising channels for your business. For example, if your company has an annual budget of $800,000 for advertising, you can spread the money on a variety of different channels.
However, if you own a small business with a much smaller marketing budget, we would likely recommend Facebook ads as the best branding vehicle to start with.
Examine Your Marketing Foundation
Next, you need to examine if you have the marketing foundation to achieve your goals. In other words, check your website, brand, reporting systems, and communication pieces. Here are some of the questions to answer:
- Do you have clear and up-to-date branding that correctly identifies your business and consistently delivers the same brand image to consumers?
- Are there any barriers to becoming a customer for your prospects?
- Is your website better compared to that of your competitors?
- Do you have the systems and tools required to measure your marketing investment success?
Create a Solid Marketing Plan
The next step is to sit down and create a solid marketing plan for your business. Examine the results you’ve gotten so far in terms of creating a community presence and a web presence – and consider these results in your decision-making.
Find out how you can maximize these results. How can you ensure you keep building on your success? If things aren’t working, what is the reason behind it?
Therefore, instead of flinging spaghetti at the refrigerator and seeing what sticks, creating a solid marketing plan can save you a lot of money in the future when you work on marketing in an organized way.
Track Your Results
Whether you start running your Facebook ad campaign on a reasonable budget or you start with a million-dollar budget, you need to keep track of your results. Thus, using tools like Google Analytics will help you track online conversions and website statistics.
Conclusion
Great job reading through this article!
The answer to the question, “how much do companies spend on marketing and advertising?” has been comprehensively detailed in this article. With the rate of competitiveness in the business world, great marketing can make or break your business. Therefore, we hope this will help guide you in making informed decisions that will help your business achieve new goals and grow.
