We recently dug into research by Forrester, Deloitte, Gartner, and the IPA (Incorporated Practitioner in Advertising) to better understand what industry standards are for Marketing budgets. We aren’t talking about just paid media, but at a higher level what percent of sales or revenue is allocated to a CMO to run marketing, from payroll and MarTech to agency fees and paid media.
We think what we found out is incredibly helpful for anyone in a marketing role that may need industry benchmarks to make a case for marketing investment. Keep in mind, however, that every business situation is different from startup to sunset, so we suggest that these be used as a rule of thumb and adjust them to make sense for your company.
OVERALL MARKETING BUDGET
Let’s start with the overall marketing budget. The lowest number we found is 7% of revenue for large B2B companies (Forrester, 2019). The highest number we uncovered is 18.6% for B2C product companies (Deloitte CMO Study, 2021). The median is 12.8%. Here’s an example of how the math works:
MARKETING BUDGET ALLOCATION
The next natural question is how is this total budget allocated? The Gartner CMO Study revealed nearly an even split between four categories of budget: MarTech, Paid Media, Labor, and Agencies/Services (like ours).
Here’s the math at the low, median and high levels of total budget based on ten million in annual revenue to keep it simple:
This breakout is very interesting to us, especially as it relates to Paid Media, which is a number that many marketers focus on. In fact, there is quite a bit of public information about “Marketing Budgets” being in the 2% – 5% of revenues range, but what they are really talking about is Paid Media budgets. This bears out when you do the math on the Paid Media allocation as a percent of revenue. Check it out… we show a range of 1.75% – 4.65%:
PAID MEDIA: BRAND VERSUS ACTIVATION
Being curious brand marketers, we had to dig deeper into Paid Media budgets. We have been advocating for more investment behind brand versus activation. What we found out is that the recommendation from the IPA is a paid media allocation of 60% brand to 40% activation. The reasons for a larger allocation of investment in brand are outlined in one of our previous blog posts, “How to make the case to invest in brand.”
Here are the brand/activation allocation numbers based on $10M in annual revenue:
The bottom line is that investing in marketing, including the brand, is critical to the long-term success of a business. And while there is no one-size-fits-all marketing budget, using industry benchmarks can make it easier to determine how much to invest and how to allocate that investment.