Why Your Marketing Budget Should Be 8% of Revenues (or More)

Before getting into the numbers, let’s reframe how we look at budgeting for marketing by comparing it to retirement savings.

The personal investing analogy

Do you invest 5-15 percent of your gross income into a 401K or other pre-tax savings plan? Approximately 62% of Americans invest today so their nest egg can grow year over year. Most people don’t view investing for retirement as a risky activity. In fact, employees have more anxiety when they don’t budget enough for retirement savings.

Don’t budget like it’s 1999

If investing up to 15% of personal income into your retirement accounts feels right, then why would investing 8% or more of your revenues in marketing feel wrong? My hand is raised and I’m going to provide the answer: This is what happens when you view marketing as an expense. That’s 1990s thinking. If companies put the old binoculars away, they’ll realize that good, modern marketing makes money. Many businesses are doing just that—and they’re reaping all the rewards.

Good marketing makes money!

Ready. Set. Budget!

In general, businesses that haven’t spent much on marketing in a while (or ever) will need to level-up their brands, websites, value propositions, collateral, and social media presence. Their annual budgets should be skewed towards building a strong foundation. (See Figure A.)

Companies that have invested in their brands and online presence should focus their budgets more on talent—the people who’ll create original content and cost-effective outreach through channels like email and social media. Public relations and paid advertising are likely to be part of the mix for businesses at this stage. (See Figure B.)

Figure A.

Figure B.

Steady as she goes

Once your business commits to investing in marketing, you need to stay the course or you’ll waste your resources. Marketing is not sales, and that makes consistency an even more critical success factor.