What Percentage of Sales Should Marketing Budget Be?

What Should Marketing Budget Be

Let’s know about marketing budget and how it works in an organization.

The topmost question weighing on the minds of most business owners when they contemplate their marketing strategy is, “How much should I spend?” The answer, unfortunately, is not a simple one. There are a number of factors that come into play when determining an effective marketing budget, including the size of your company, the scope of your marketing goals, and the competitive landscape in your industry.

That said, there are some general guidelines you can follow when it comes to allocating funds for marketing. As a rule of thumb, your marketing budget should be approximately 5-10% of your overall revenue. So, if your company is bringing in $1 million per year, you should be spending $50,000 to $100,000 on marketing.

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Also Read: What is retail marketing?

Common Marketing Budget Percentage

February 2022’s CMO Survey from Deloitte reported that marketing budgets made up around 11.8% of the entire company budget—slightly lower than in June 2020 (12.6%). But still, it is the highest indicator compared to what marketers have seen in the last four years. Of course, these averages don’t take into account the specific needs of your business.

If you’re in a highly competitive industry or are looking to make a major marketing push, you may need to increase your budget to 20% or even 30% of overall revenue. If you want to do this, make sure that you’ve developed a comprehensive strategy to achieve success and not lose money for no purpose. Check this article to plan your SEO budget that will consider all your needs to achieve the business goals.

Individual company goals naturally affect what strategies and channels marketing teams choose to invest in. In 2022, 73% of companies have invested in website optimization while only 20% have chosen to invest in machine learning and automation.

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Marketing Budget Benchmarks by Company Size

Another way to look at how much you should be spending on marketing is by taking into account the size of your company. Obviously, a large enterprise is going to have a larger marketing budget than a small business. But what’s the appropriate percentage for each?

Here are some general benchmarks to help you determine an effective marketing budget for your business:

  • Small businesses (revenue under $5 million): 4-8% of revenue.
  • Medium businesses ($5-$50 million): 5-10%.
  • Large businesses (over $50 million): 2-5%.

As you can see, there’s a pretty big range for each category. The reason for this is that there are so many different factors that can affect your marketing budget, from the size of your target market to the amount of competition in your industry. The best way to determine an effective marketing budget for your business is to work with a marketing agency or consultant who can help you assess your specific situation and develop a customized strategy.

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Conclusion

In this blog, we have discussed what is the marketing budget. In today’s era, every business spends money on marketing to grow the business. At the beginning of the year, Companies or businesses prepare a budget for how much money they will invest in marketing. Marketing is our investment. Marketing is essential for any successful business. On the other hand, budgeting helps track business’s expenses.

Effective marketing helps to create good customer relationships, more brand awareness, goodwill and increased business development, all of which are dependent on a good budget. Basically the marketing budget is a layout of all the money spent in the business for marketing related projects over the budget period(monthly, quarterly, yearly). Effective marketing budget is necessary to your business’s success.