What Percentage of Your Revenue Should Go Into Marketing?
By crystalmarketing | November 5th, 2021
By crystalmarketing | November 5th, 2021
We live in the middle of the most competitive business environment that has ever existed.
Even small, local businesses are facing increasing pressure from competition – largely driven by the reach of the internet.
This has made marketing even more important, the real deciding factor between success and failure in the world of business today.
It’s why you need to be smart about making sure that you are investing heavily in your own marketing with the right percentage of your revenue.
But what is the correct percentage of revenue you should be funneling into your marketing budget?
How do you know your spending enough?
How do you know you’re not wasting money?
How do you know the money that you are investing on marketing is actually producing a net positive effect, boosting your bottom line and helping you ring your register more frequently?
Let’s dig a little deeper into those questions right now.
To kick things off, there’s no cut and dry figure that is a one-size-fits-all approach for every business that determines how much of your revenue should be going directly into marketing.
According to the folks at Deloitte, the average business has a marketing budget that makes up close to 13.2% of overall revenue numbers.
The same research found that business-to-business companies usually spent the least amount of money on marketing, usually only around 10% of their revenue figures. Business to consumer companies had much higher numbers, coming in at around 18.6% of revenue invested in marketing.
A similar study from Gartner’s discovered that businesses were spending about 11% of company revenue, with the figure fluctuating a little bit from year-to-year but always settling around 10% to 12%.
At the end of the day, the research shows that (most) businesses – large and small – are reinvesting somewhere between 10% and 13% or so of their revenue numbers on marketing.
That’s not a bad figure for you to shoot for, either.
It would be a major mistake to put a hard cap on the dollar value of the money you’re investing in marketing rather than go with a percentage of your overall revenue figures.
You need to remember that nothing – absolutely NOTHING – in the world of business happens until something gets sold.
You could have the best products, the best services, and the best prices in the world combined with top-tier customer support. But if you’re not able to get customers to see that, and to choose you over your competitors, you’re going to be out of business sooner rather than later.
By tying your marketing budget to a percentage of your revenue figures you’ll always be reinvesting into this huge driver of sales.
You’ll be able to accelerate your growth significantly by funneling a percentage of sales back into your business, particularly an area like marketing that is only going to boost your sales numbers even higher – rinsing and repeating the process as much as possible to hit your sales goals.
The easiest way to increase (or decrease) your marketing budget is to lean on your marketing people to track the effectiveness of your campaigns, to optimize individual advertisements and marketing messages, and to continuously improve on a day-to-day basis.
This can be done with an in-house team or an outside agency. Both having flexibility and the capabilities to increase or decrease your marketing budget in relation to your revenue numbers depending on your actual business metrics.
Make these decisions data driven and you’ll always know what the right move is.
Marketing really is the lifeblood of every single business.
As we highlighted a moment ago, nothing in the world of business matters until something gets sold.
Actually convincing a complete and total stranger to give you their hard-earned money exchange for your products and services is the most expensive thing you’ll ever do.
The right marketing campaigns make this a much easier, however, and really effective marketing campaigns turn the strangers not just into one time customers but repeat or lifetime customers – and even customers that become your most effective salespeople, too.
It’s important to make sure that your marketing is always backed up with a budget that can help to guarantee its success. As soon as you start trimming resources from your marketing budget expect your sales to tank, and that’s going to have a negative impact on your operation across the board.
At the end of the day, it’s a savvy move to tie your marketing budget to a percentage of your overall revenue.
This helps you create a bit of a self propelling system that guarantees your marketing war chest always has the resources necessary to succeed – and as your sales figures grow so will your marketing budget!
That’s the fast track to success in today’s hyper competitive business world.