“How much should I spend on marketing?” Five tips to get the most bang for your marketing buck.

Posted by Anya Sleezer << back to blog

Last Updated on July 29, 2022

Marketing is one of the most important things your business can do. Sure, as a full-service marketing agency, you’d expect us to say that, but it’s absolutely true!

After all, say you make the greatest product or provide the best service. If no one knows about it, no one will buy it. Even if it’s the best thing since Snapchat.

So, now that we’ve all agreed that it’s essential, the big question is–how much should I spend on marketing?

We have this conversation with clients all the time. With literally hundreds of marketing tools, tactics, media buys, and agencies out there, it can be overwhelming to figure out how much your company should spend, and which will give you the most ROI.

Over the years we’ve seen many marketing gimmicks come and go and we’ve seen what works, and what doesn’t. So, here are our top five tips to get the most bang for your marketing buck.

Tip #1 — Change the way you think about your budget.

Succeeding in marketing starts with your mindset. No, this isn’t some “just think positive”, self-help advice. It’s looking at marketing as a benefit, not a burden, to your bottom line. In other words, marketing isn’t a necessary evil; it’s a necessary good!

So let’s start here: you’re not spending money on marketing, you’re investing in marketing. The distinction is important. For example, you probably invest a certain amount of your paycheck into retirement in the hopes of a return-on-investment. Marketing is the same way; you’re investing a certain amount of your business’ revenue in order to increase your business’ profits (i.e. your return-on-investment).

So how much should you invest? We’re glad you asked!

Tip #2 — Follow the 5% Rule

You should spend at least 5% of your sales revenue on marketing. Yep, it’s that simple. If you remember just one thing from this article, it’s that.

Does 5% seem high? Actually, it’s quite reasonable. The U.S. Small Business Administration recommends spending up to 8% of your gross revenue for marketing if you’re doing less than $5 million a year in sales. If you’re a new company, some analysts even say you should spend up to 20% on marketing! Established companies have it a little easier, but are still encouraged to spend 8-12%.

So you’re probably thinking: “Wait, 5% seems like a lot, but is it actually not enough?!” It’s important to remember “the 5% rule” is more of a guideline, and applies to most years, not all. You should absolutely make marketing a top priority and if you feel like you can invest more, you should. But your marketing budget should always be at least 5%.

We like 5% as a baseline because it gives you a nice, solid foundation to build on. It also gives you enough flexibility to see what marketing executions work best for your business (more on that later). There’s nothing worse than spending too much on a marketing execution that isn’t working. Which leads us to our next tip.

Tip #3 — It’s not just how much you spend, but how you spend it.

If you’re a local coffee shop spending 5% of your revenue on a billboard campaign in a completely different state, that’s not a good strategy. Most marketing mistakes aren’t so obvious, which is why it’s important to consult with experts.

How you market is unique to your business, but your marketing budget should always include the following four things:

Branding
Marketing strategy
Website design and development
A mix of highly–targeted print and digital marketing

Your brand is your logo and positioning tagline, but also your ongoing advertising and public relations. Think of these executions as the arrows you fire at your target (i.e. your business goal). Your marketing strategy is like aiming: what is my target and how am I going to hit it?

Your website is the most important arrow in your quiver. Why? Because your website is like a storefront, but it’s open 24/7 to showcase your brand, and your product or service. If you’re an e-commerce company, your website is even more important, as it’s literally how your company makes money.

A mix of highly–targeted print and digital marketing is just that. It can be a promotion to get new customers in the door, loyalty programs to keep customers coming back, special events, SEO, digital advertising, social media, email campaigns, direct mail, you name it. If you don’t budget a certain amount for unforeseen marketing expenses, these miscellaneous things can really take a bite out of your 5%.

Tip #4 — Be Flexible

Remember what we said we loved about “the 5% rule”, It lets you be flexible!

For instance, you’re probably going to have to exceed your 5% budget once every 3-5 years just to keep your website up to date. If you’re an e-commerce company, it may be even more frequently. Or, say you open a new location. First, awesome! Second, you’re going to need to spend more to market the new location as well as your original one.

But being successful at marketing isn’t just maintaining the status quo; it’s learning to be flexible to changing scenarios.

Let’s say you’ve invested $1,000 a month on online banner ads for years, but for the past year you’ve only gotten one new customer from these ads per month. Yikes! This is a red flag something isn’t working. Spending more on the same banner ads isn’t going to fix the problem. Instead, try a different marketing tactic, like email or direct mail campaigns, or completely overhaul your banner ad campaign until it performs.

Bottom line, marketing isn’t stagnant. Be willing to adapt your marketing to improve performance, meet the needs of your growing business, and take advantage of new trends and tools. Which leads us to our next tip.

Tip #5 — Keep up with the trends

This falls in line with Tip #4. You should always stay up-to-date on the latest marketing trends both in your industry and in general.

For instance, the average firm is expected to spend 45% of their marketing budget online in 2020, with the largest share being spent on search engine optimization. Meanwhile, in a recent survey of 2,500 digital marketers, respondents report that email continues to deliver the highest ROI of all digital channels. Yep, for all the flashy new digital channels out there, your customer’s inbox is still the winner when it comes to making the sale.

On the flip side, if your customer base is in a younger demo, it’s mission critical that you know what social and digital channels they’re using. The point is, times change, trends change, but successfully marketing to your customers is always important for your business.

Still have questions?

We’re happy to help! Whether you’re a small-, medium-, or large-sized business, we’re ready to help you make the most of your marketing budget. Contact us!

Anya Sleezer

Anya Sleezer is the owner of Levo, a full–service marketing agency, focused on helping companies from all industries who are concerned with their marketing results, traffic, branding, advertising, or websites.

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