February 23, 2023 (Updated: May 4, 2023)
Marketing is all about creating the maximum impact on your target audience. In an ideal world, you’d have unlimited funds to realize your vision. Yet most marketers are bound by a strict budget, allocating a marketing budget percentage based on the company’s revenue.
CMO survey results from Gartner show that budgets have grown slightly post-pandemic, with the average marketing spend increasing from 6.4% to 9.5% of company revenue. While this is a significant increase, budgets are still smaller than before—between 2018 and 2020, they averaged up to 12%. But not all industries are the same. Depending on the size, market, and growth stage you’re in, you’ll see different numbers. Today, we’re exploring the typical marketing budget percentage by industry with the following topics:
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The largest portion of a marketing budget usually goes toward direct marketing costs. These types of costs cover anything directly related to the sale and promotion of a product. When dividing up direct marketing costs, you’d typically allocate your budget across digital marketing and traditional marketing.
The budget for digital marketing is often the largest, where companies fund initiatives for brand websites, search engine marketing, social media, online advertising, email marketing, and even video marketing. With the development of technology and online marketing, traditional marketing often expends a smaller budget on initiatives like mail ads, magazine features, and out-of-home (OOH) marketing like billboards. In fact, online channels currently take up to 56% of the average budget, while offline channels lag behind at 44%.
There are several reasons why digital marketing budgets are the biggest. Most importantly, digital methods are much cheaper and more effective. Statista’s 2018-2023 study shows digital search advertising has the highest return on ad spend (ROAS) out of any marketing method. For each dollar invested, marketers gained a massive 11 U.S. dollars in sales. Meanwhile, OOH trails behind at $5.97 per $1 spent (OAAA). Looking at these figures, it’s easy to see why the average digital content marketing budget percentage is so high.
Since social media has become part of the campaigning ecosystem instead of a separate field, the percentage spend is even higher. The remainder of the marketing budget balances across three key areas: staff, training, and research. Staff costs include maintaining advertising offices, employee wages, bonuses, and time spent on recruitment. Training costs mainly focus on licensing for tools.
Marketing research costs include funds for collecting information about campaigns, testing out ideas, understanding the target audience, and trend forecasting. In the past, marketing research was much more expensive. But as marketing continues to move online, it’s cheaper and easier than ever to monitor campaigns with built-in analytics and tracking tools.
As each industry operates differently, they each have their own variation on the average marketing budget structure. This is unique on every level – from the amount they spend overall, to the amount they spend in different areas.
SaaS (software as a service) is one of the more recent industries marketers might encounter. Demand for marketing in this industry is growing quickly as a result. SaaS marketing budgets depend on the percentage of revenue the company can afford to reinvest.
Many SaaS businesses are startups, though, so they’re willing to invest big to establish their brands. Even as they scale, they aren’t bound by physical overheads, so they prioritize growth above all else. For example, CRM company Salesforce invests 46% of its revenue into marketing.
Technology companies often have huge revenues. Think of the tech giants like Microsoft, Apple, Google, Samsung, and Intel. New movers often struggle to gain traction, so companies like these typically dominate the marketing spend statistics. According to Vital, Microsoft spent an average of 15% of its revenue on marketing, while Apple spent about 6% in 2018.
The high level of customer trust in these brands can make it nearly impossible for startups to enter the market. And when startups do enter the arena, their marketing budget percentages are usually similar to SaaS companies—that is, substantial investments to force growth.
Manufacturing encompasses a range of fields, from health care to food to fashion. But while marketing can be a major factor driving sales, the entire industry doesn’t spend much on it. In fact, the majority of manufacturing companies don’t spend more than 1% to 5% of their total annual revenues.
For example, Johnson & Johnson is one of the most established brands in the consumer health product industry. Yet they still spend a much lower percentage of their revenue on marketing. In 2022, J&J spent a total of $2.1 billion on advertising. While this seems like a lot, its total revenue of $94.943 billion means the company only spent about 2.2% of its revenue on marketing and advertising.
Like manufacturing and production, retail is a competitive industry. Marketing is vital if you want to position your brand and generate sales. But how much of your revenue should you spend on marketing? Overall, retail companies spend about 15% of their revenue on marketing and advertising. And much of this ad spend goes towards digital marketing efforts, including social media, email, and search engine optimization (SEO). In fact, by the end of 2020, search engine marketing accounted for 47% of the total retail ad spending. Even huge retailers recognize the benefits of budgeting for content marketing and SEO.
Construction isn’t the first industry that comes to mind when you think of marketing. However, well-targeted, effective marketing is the best way to gain a foothold in the industry. It’s also crucial for customer service outcomes such as trust-building and client satisfaction, which are the backbone of a construction company’s success.
In general, construction marketing is incredibly targeted. Because of this, the average marketing budget percentage of revenue is low, with the mining and construction industry as a whole only spending around 0.6%. But even with this low budget, most construction companies still spend about 13% of their overall budgets on marketing.
You might not think that a marketing company needs a large budget with so many talented people on staff. Surely, if anybody can create an effective campaign with low costs, it’s them. Yet marketing companies still need a sizable marketing budget percentage. Without that, they can’t attract high-profile clients.
Communications and media agencies spend about 10% of their total annual revenues on marketing. Public relations, advertising, and digital marketing all fall under the industry. So, if you’re planning your marketing budget, review the industry standards to get a baseline of what your brand should likely budget for.
There are many factors that influence the size and proportions of your marketing budget. Four key factors can affect the typical marketing budget: industry-specific costs, your company’s size, your primary market, and where your company is on its journey.
How much you spend on marketing is entirely dependent on your industry-specific needs, issues, and non-advertising costs. Typically, customer-facing industries have a higher marketing budget than industries that aren’t customer-facing. For example, a consumer services company might spend more than the average revenue percentage on marketing, while a company in a closed field like mining might only allocate a fraction of its revenue.
The difference here is that the consumer services business likely doesn’t have the same industry-specific costs as the mining company. If your industry requires more costs to operate within, these expenses can affect how much your business can allocate to a marketing budget overall.
Obviously, every marketer wants their company to grow. But some companies don’t have exponential growth in sight just yet, so an overly large marketing budget wouldn’t fit with where they are on their journey. So a small, slow-growing business will have a smaller marketing budget than a large corporation like Amazon.
On the other hand, if you’re trying to branch into a new market quickly, your business may need a higher percentage to attain the growth you want it to achieve. So your budget won’t just depend on the physical scale of your business, though. It’ll also depend on its longevity. This is especially true for startups. If you’re running a startup, a large part of your budget might go towards attracting early adopters and creating prospects that can allow you to scale later. But an established company would spend less, as they’re focused on customer acquisition and beating the competition.
Of course, the size of your company still affects your marketing budget. In fact, a BDC survey found that small businesses in Canada spend an average of $30,000 a year, while larger companies and corporations spend about twice that amount.
So in the startup stage, you could have an extremely high marketing budget percentage. Then, as your company grows, this budget can even out before increasing again to account for larger marketing initiatives. Essentially, your total marketing budget can depend on the size, scale, and growth stage of your business.
Different target markets require different marketing budgets. Depending on your target audience, you’ll need to allocate different amounts to each marketing strategy your team uses to reach them. CMO surveys show that marketing expenses in B2B-focused companies focus more on training, analytics, and staff. Meanwhile, B2C product and service companies spend more on social media.
When it comes to allocating funds, companies will always prioritize the methods and expenses that translate into better impact for their brand. Most of the budget will always go to the areas that reach your customers best.
Ultimately, there’s no one-size-fits-all approach to setting your marketing budget. The most important thing to remember is that marketing budgets are subjective. The ideal marketing budget for your company’s industry, scale, or target audience can vary drastically from your competitors.
So, take these typical marketing budget percentages as a guideline. Even industry-specific benchmarks should only be the beginning, as you only know what’s right for your business. By analyzing your own figures and making comparisons, you can form a better picture of what percentage of your revenue to allocate to your marketing budget. And even if your content marketing budget looks different from your industry competitors, it doesn’t mean it’s wrong.
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