President
During Q3 and Q4, which are typically busy quarters, businesses have a multitude of tasks to address. These include measuring performance and revenue goals, setting plans and objectives for the upcoming year, as well as determining overall budgets. When comparing revenue-based marketing budgets, it is noteworthy that the average expenditure of US companies has increased from 8.7% in 2022 to 10.3% in 2023 of their annual revenue. However, it is important to note that individual companies may allocate anywhere from 0.5% to 20% of their annual revenue towards marketing.
While we can probably all agree that setting an appropriate annual marketing budget is an important part of reaching your business performance goals, there’s no exact science out there to help you nail down what that number should be. To complicate things further, there are a myriad of factors that should be considered and those can change depending on the industry, company, and market.
We’ve highlighted the top four factors we discuss with our clients during annual planning:
In A Nutshell
Increase your budget when you are:
Planning for aggressive sales or growth goals
Introducing new products or services
Targeting a new market or segment
Working in a competitive industry/market
Keep your budget flat when you are:
Finding success with your marketing strategy and duplicating what was done previously (with a few smart optimizations, I hope!)
Aiming to just maintain sales
Facing supply chain or product shortage issues
If you’re limited in how much budget you can allocate to marketing…
You’re not totally out of luck. Start by making a list of things you can do vs. outsource (all of which should help you reach your goals while saving valuable dollars).
See the table below for an example:
