How Much Should a Company Spend on Marketing?

“How much should I spend on marketing?” Good question.

According to the U.S. Small Business Administration, companies with less than $5 million in revenue (and profit margins of 10-12%) should invest 7-8% of their revenue into marketing. Your industry, business size, and growth stage all affect what percentage of revenue should be spent on marketing.

Calculate Your Marketing Budget

Keep reading to learn more about the marketing budget percentage model, plus get tips for calculating how much to spend on marketing in 2020. You can also use our free marketing budget calculator to start planning your marketing investment!

What does a marketing budget include?

Before learning about how much to spend on marketing, it’s critical to understand what a marketing budget includes. For example, does a marketing budget include in-house staffing and website maintenance?

While every marketing budget is different, most include:

  • Marketing software
  • Freelancers
  • In-house team members
  • Direct expenses, like running an ad campaign
  • Marketing agencies

If you’re not sure what your company’s marketing budget includes, ask a team member. Once you know what your marketing spend doesn’t cover, you can start outlining and planning your 2020 marketing budget.

How much to spend on marketing: Marketing budgets by business size

Company size is one of the most important factors when asking, “How much should a company spend on marketing?” Based on your business's size, you can often estimate what percentage of revenue should be spent on marketing.

Here is a breakdown of how much to spend on marketing based on your company’s size:

Business Size Percent of Revenue to Spend on Marketing

Small business

7-8%

Mid-sized business

10%

Enterprise business

15%

How much to spend on marketing: Marketing budgets by industry

Industry is another crucial factor when it comes to how much to spend on marketing.

Use this table to compare your company’s marketing budget percentage to the average:

Industry Percent of Revenue to Spend on Marketing

Communications

9%

Construction

3%

Consulting

8%

Consumer packaged goods

9%

Consumer services

19%

Education

12%

Energy

8%

Finance

9%

Healthcare

9%

Insurance

9%

Manufacturing

2%

Retail wholesale

4%

Technology

10%

3 tips for making the most of your marketing budget

Now that you know how much to spend on marketing, you probably have questions about making the most of your marketing budget. Nobody wants to waste their marketing spend, so use these tips to ensure your business get the best return from its marketing investment:

1. Develop a marketing strategy

A marketing plan is critical to a marketing budget. Outline your goals, marketing channels, and tactics before launching a campaign to direct your marketing spend to the right projects. With a marketing plan, you can take a strategic approach to promoting your business.

2. Use analytics software to track your performance

Website analytics software like Google Analytics is a must-have. That’s because these tools can track and measure your return on investment (ROI) for you. Some tools, like MarketingCloudFX, can track all your channels in one place!

3. Adapt your strategy to changes

While you can make a few (or zero) changes to a traditional marketing campaign, digital marketing is flexible. Take advantage of digital marketing’s flexibility. Adapt your tactics based on your data, like from an ad campaign, to drive even better results.

How much should a small business spend on marketing (and where?)

Small businesses include everything from mom-and-pop stores to local industry powerhouses. But by definition, a small business doesn’t make as much money as other companies, so how much should a small business spend on marketing?

When looking at the marketing budget percentage model, 7-8% is a safe chunk of your overall revenue that’ll steadily improve your company’s customer base. It’s an excellent starting point for your company’s long and prosperous future — you just need to manage your budget effectively.

Search engine optimization (SEO) is just one way a small business can make the most of a tight budget. You can also invest in pay-per-click advertising (PPC) for an affordable alternative to traditional marketing.

It may not sound like much, but just using those two marketing strategies can help your business grow safely and steadily.

How much should a mid-sized business spend on marketing (and where?)

Mid-sized businesses have a couple hundred employees and typically seek long-term, sustainable growth that’ll make them a major industry player. If you’re marketing a mid-sized business, you should be willing to scale your marketing budget upward, even by percentage, to make sure you can keep up with your industry.

So, how much should a mid-sized business spend on marketing?

Naturally, the exact percentage will depend on your industry and growth stage. But 10% is generally a safe bet when discussing how much to spend on marketing as a mid-sized company.

Mid-sized businesses should also use SEO and PPC, and can typically afford to use some traditional marketing strategies, too. The cost of advertising is definitely higher, but if you’re shooting to generate brand awareness in a competitive industry, it’s a great way to achieve your goals.

How much should an aggressively-growing business spend on marketing (and where?)

If your business has a specific strategy for short-term, explosive growth, it can be considered an aggressively-growing business.

While this kind of growth may not always be sustainable, it can definitely be profitable. That’s the allure for entrepreneurs who want to lay the foundation of a company and then sell it off for a nice profit.

Intentionally aggressive businesses can easily overstep their boundaries when they first start their marketing strategies. With a “whatever-it-takes” mentality, you can quickly find yourself low on cash with debt piling up.

That’s why even aggressive businesses should stick to the 15% range for their marketing budget percentage. It’s important to establish a business’s foundations before shooting for the stars. And even if your marketing campaign is great, it won’t do much good if you divert money from your other departments. After a while, your lapse in company-wide support will show, especially to customers.

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This is especially true for product development. Moving money away from the company’s heart to fund marketing is a surefire way to disappoint customers and weaken the company as a whole.

Still, aggressive growth isn’t always bad. If you want to meet short-term goals quickly, a boost in marketing can help you do so.

SEO and PPC are great marketing strategies for these companies, but are often accompanied by less orthodox “growth hacking” strategies. Since you want to grow fast, you basically have to use every marketing avenue at your disposal to get the results you want.

Make the most of your marketing budget

Regardless of how much you choose to spend on marketing, you'll want to make the most of that budget — and today, the best way to do that is with online channels. Contact us today to speak with a strategist about how WebFX can help you get the best possible results for your business.

How much should specialized industries spend on marketing?

Special industries are certain commercial sectors that require more marketing investment than others.

These industries include:

  • Pharmaceuticals
  • Retail
  • Consumer goods

There are more special industries than just these, but these are the major industries that require significant marketing investments to succeed.

The reason is that so many companies in these industries have already heavily invested in marketing. So if you’re starting a pharmaceutical or retail company, you have an uphill battle to get brand recognition.

Pharmaceuticals are marketed mostly in the United States. The industry is highly competitive since drugs like Lipitor single-handedly yield billions in revenue. Every pharm company is looking to make the next big pill, and every time they try, they have to spend millions on marketing campaigns.

Retail is one of the biggest industries in the world, and it’s saturated by companies who offer practically everything you could ever want to buy. Regardless of the products your company sells, you’re bound to have stiff competition. That means you’re up against industry giants and startups that all want to earn billions from retail, so you have to spend more on marketing.

Last, consumer goods is possibly the most competitive industry in the world because of how broad it is. Everything from food to home appliances qualifies as a consumer good, and some of the biggest brands in the world earned their fortunes on consumer goods. If you want to break into packaged goods, appliance manufacturing, or most other physical products, your competitors are spending as much as they can to make you fail. It’s up to you to fight back.

The way you fight back is by using every kind of marketing you can. That includes SEO, PPC, television, newspapers, reputation management, social media marketing, and more. You have to constantly fire on all cylinders so you stay at the forefront of your industry.

Get a custom plan that fits your marketing budget percentage

WebFX is a full-service Internet marketing agency that’s been around since 1997. That means we know how to use SEO, PPC, and other digital marketing strategies to effectively grow your business. With us, you’ll have a dedicated marketer to help you choose marketing strategies, plan your budget, and bring in more revenue than ever before.

Want to grow your company? Contact us today to lay out a custom marketing strategy that’ll fit your budget!