The Complete Guide To Marketing Budget

You know you need to spread the word about your brand even though you have some ideas for how to do it. So how do you know which ideas are good?

What should you spend?

Marketing money sounds like it would help you a lot.

What is in This Guide? 

This guide tells you how to make an effective marketing budget to keep your business growing.

So that people will buy your product or service when they see your ad.

  • How much money does it take to market?
  • What is the marketing budget? 
  • Your marketing budget should be aligned with your company’s objectives.
  • Marketing your brand vs. marketing your product costs more money.
  • How do you calculate your marketing budget?
  • How to make a marketing budget
  • Finally considerations you need to think about your marketing budget.

Let’s go.

The Importance of Spending on Marketing? 

Marketing is important to build brand awareness and increase profits for your business. 

There’s a good chance that word of mouth will spread about your brand if you don’t spend money on marketing. But this can take a very long time.

If you want to compete, you’ll have to spend money on your marketing efforts. Market share and time will be lost if you don’t at least keep up with them. Moreover, it will be more challenging to get back that market share later.

What is a Marketing Budget? 

A marketing budget is the entire amount of money spent by a firm on growth and promotion during a specific time period, such as a month, quarter, or year. These can include the following:

  • Website design and development 
  • PPC ad campaigns
  • Campaigns on social media
  • Campaigns for email marketing
  • Content for content marketing campaigns
  • Building backlinks
  • Traditional marketing campaigns such as print, TV, radio, direct mail, etc.
  • Tools and software that are used for marketing-related work
  • Employees and contractors who work on marketing-related projects

It will depend on how big and complicated your business is to determine how much money you need to spend on marketing.

Small businesses may be able to spend less money on marketing by having just a few employees or contractors write a few blog posts for a content marketing campaign and then use basic PPC and social media ads to spread the word about them.

Large businesses may have a lot more complicated marketing budgets because they have a lot of different departments or divisions. In addition, each department or division has its own business goals that tie back to the more significant business’s growth goals.

Why is Marketing Budget Important?

Having a marketing budget is very important for a lot of reasons.

1. You know how much money you can spend.

As a business, how do you or your employees know how much money to spend?

People who sign up for a subscription-based service have an average lifetime value of $2,000, so let’s say you have a subscription service. 

You tell your marketing team that they should get more customers, but you don’t tell them how much money to spend. 

There were 100 new customers worth $200,000 to your business when your team told you at the end of the month. So it only cost them $100,000.

So, that’s great, but each customer only makes $500 in their first month, so you spent $100,000 to make $50,000 for your business in the first month. You can’t pay your employees next week.

2. You can figure out how much money you should spend on marketing, so you don’t waste money.

As a follow-up, having a marketing budget lets you figure out how much money your business needs to reach its goals. That way, you can find a point where you’re growing at the correct rate while still being able to pay your bills.

If your budget is too small, you might not meet your growth goals and/or lose market share to your competitors, hurting your business.

To avoid going broke, you might have to cut back somewhere else.

3. You have to put your marketing efforts in order.

In addition to PPC ads, social media ads paid sponsorships or promotional events, and other ways to grow your brand, you can spend money to do this.

You can’t spend more than $5,000 per month on one channel, so you have to choose one over the rest. A tool like TrueNorth can help you decide.

Your marketing budget should match your business goals.

Your marketing team is working hard to build your company’s brand and find new customers with the money they have set aside.

But what if that isn’t what they’re doing at the moment?

In other words, what if they’re not doing that right now, but they think they are?

Your company’s sales funnel something to think about for a while. For example, yours might look like this:

sales funnel

It’s now time to think about what your marketing team is doing and where they are in the funnel.

As a business, they should be trying to get as many customers as possible. But instead, they think about qualified leads, traffic, or impressions?

Let’s look at two simple examples to show this point. In both situations, your company is promoting your $1,200 email marketing course, which is very good and very useful.

Scenario A

In Scenario A, your marketing team runs a PPC ad campaign to get more traffic. They are targeting keywords like “why use email marketing” at the cost of $10 per click to get more traffic. They have $15,000 to spend, and they want to get 1,500 people to visit their target page. 

The campaign leads to 15 new customers (1 percent conversion rate) and $1,200 revenue per customer.

They spent $15,000 and made $18,000 in profit for a 20% return on their money.

Scenario B

In Scenario B, your marketing department is running a pay-per-click (PPC) ad campaign to get more customers to buy your products. 

They are targeting buyer-focused keywords like “best email marketing course” at the cost of $20 per click to get more customers to buy your products. 

To put it another way, they have $15,000 and only get 750 visitors to their target page. 

But those 750 visitors turn into 25 new customers (3.3 percent conversion rate) and earn them the same amount of money per customer.

In total, they spent $15,000 and made $30,000 for a 100% return on their investment.

In Scenario A, the marketing team was able to get twice as many visitors. B: 

In Scenario B, the marketing team was able to get a lot more money for the same amount of money because they were targeting customers further down in their sales funnel.

This doesn’t mean that you should always try to get customers who are already in the buying phase of their journey to your business. 

The best way to get customers is to target them at the top of the sales funnel because they’re less expensive to get, and your email marketing is effective.

If you want to get the best return on your marketing investment, your marketing team needs to think about your business’s goals.

Brand vs. Product-Based Marketing Costs

There are two ways your company is marketing itself at the same time.

  • Awareness and visibility of the brand as a whole
  • Promotion and lead generation for a specific product

These two types of marketing work well together, and an effective marketing budget takes both into account.

1. Brand awareness and visibility

Spend some of your marketing money on making people aware of your brand. 

It’s good to spend money promoting your brand’s overall expertise and authority if your company sells B2B training courses, such as the email marketing course shown above. 

Many different ways can be used to market this level of marketing:

  • Sponsorships
  • Provide guest blogging or podcast appearances.
  • Traditional marketing, TV, and print ads. 
  • Native advertising and display ads.
  • Campaigns for branded hashtags on social media

These marketing efforts help your whole company, affecting how much money your specific products make.

Even though this isn’t always the case, it’s usually the case that because these sorts of brand awareness marketing efforts are ongoing, they have fixed monthly budgets, less direct efforts.

It doesn’t mean that just because these campaigns are more indirect and don’t directly promote specific products, you can’t (or shouldn’t) track their ROI, though it can be a lot more challenging to do. 

You can measure the value of your brand awareness efforts by tracking referral traffic, on-site engagement, and email signups to see how well they work.

2. Promotion and lead generation for specific products

One level down from general brand awareness is promoting a specific product. For example, if your company sells B2B training courses, this is the money you spend advertising a particular course to get more customers and make more money.

Product-specific promotional efforts can impact your whole brand, but those benefits aren’t the main goal. 

Instead, the main goal is to get more customers and make more money by selling more of the product being promoted.

Product-specific marketing campaigns have a different feel than general brand awareness campaigns.

  • PPC ad campaigns for keywords that are related to a specific product.
  • Influencer paid promotions to feature your product
  • Giveaways of free products for well-known brands in your field to review.
  • Content marketing campaigns that write solution-focused blog posts and tutorials.

These types of marketing have one goal: to make more sales of a specific product.

These types of product-focused marketing activities usually have a wide range of budgets. In this case, it doesn’t mean that you spend different amounts each month, but rather that your company’s products are more dynamic than your brand itself. 

Your company may want to spend more money on marketing for a new or updated product when it comes out. 

This will help build excitement and momentum for the product when it comes out. 

A new product or an updated version of an old one might come out in the next few weeks and months, and you want to spend your marketing money on those instead.

Calculate your Marketing Budget

There are two common ways to set marketing budgets:

  • Benchmark budgets
  • Zero-based budgets

One is a lot better than the other.

Benchmark budgets

Benchmark budgets are bottom-up budgets, which means they allocate money based on a number at the bottom of the list. A few examples of benchmark budgets are shown below:

  • 12% of revenue
  • “Profit First” budgeting means that 12 percent of revenue comes after expenses.
  • Fixed budget for monthly, quarterly, etc

There are a lot of benchmark budgets because they’re safe and easy, but they don’t take into account your business’s goals or growth targets, which can make them less useful. 

It’s like running 15 miles a week to prepare for a marathon. 

If you run five miles a week, that’s better than not running. But, is it enough training to finish in less than four hours? What will happen on race day?

Zero-based budgets

There are zero-based budgets, which are budgets that work from the top down. 

They work backward from your business goal to figure out how much money you need to spend.

That means working backward from your goal finish time to figure out your average pace and how many miles you need to run each week to get there.

This method is more focused and gives you the best chance of meeting your goal.

A zero-based marketing budget starts with your true north metric, which is the one metric that, if increased, will help your business reach its goal.

Let’s go back to our email marketing class example from above. Let’s say you want to make $600,000 in sales over the next year. With zero-based budgeting, you start with your goal in mind and work backward from there.

  • You want to make $600,000 more in a year.
  • A customer who makes $1,200 per customer makes 500 new customers. 
  • If you’re going to make 50% of your money, you should spend $600 to get a new customer.

In the case of your chosen marketing tactics, there are many different ways to reach your goal of having each person spend $600. 

A and B are the two scenarios above. So let’s go back to these two scenarios.

Because they’re running a PPC ad campaign for keywords like “why use email marketing,” the marketing team in Scenario A knows that their campaign only turns leads into customers 1% of the time. 

So, as a rule, they can’t spend more than $6 per click to reach their goal of $600 for each new customer acquisition.

In Scenario B, the marketing team runs a PPC ad campaign to get new customers by targeting keywords like “best email marketing course.” They know that their campaign only turns leads into customers 3.3% of the time. 

If they want to spend $600 to get a new customer with a 1% conversion rate, they can’t spend more than $20 per click.

It’s a good idea to use a tool like True North or to keep track of all of your campaign ideas and record their results in one place to focus on the best ones and grow your business faster.

How to Create your Marketing Budget

Creating your marketing budget is a little more complicated than just setting aside money for different costs or campaigns. 

You should pay attention to these five steps:

  • Determine the goal of your business and its True North metric.
  • Understand how your sales funnel works so that you can make
  • Quantify operational costs
  • Factor in the costs of all product-related advertising.
  • Measure and keep track of your ROI

All right, let’s get a little more in-depth for each one. 

1. Find out what your business’s goal is and what its metric is.

Every good marketing budget starts with the main goal of the business. So what does it mean for your business to be successful?

Once you know what success looks like for your business, you can figure out your True North metric. This is the one metric that, if it goes up, will help you reach your goal.

First, you need to figure out what your goal is. Then, everything you do after that should always be connected to that goal. Is it worth it to do your marketing plan and budgeted costs if they don’t move the needle for your True North metric?

2. Find out how your sales funnel works and how you can improve it.

Your sales funnel shows how you move people through the different stages of the buying process to turn them into customers that will, in turn, increase profits for you. 

It should cost less money to get general prospects or visitors to your site who aren’t yet qualified leads. They aren’t ready to buy yet.

Conversely, it should cost more to get leads who are already in the sales funnel and ready to buy.

Putting the right campaigns, marketing materials, content, and sales pitches in front of people who are at the right point in the buying process should be your goal at all times, no matter what stage they are in.

If you do this well, you can learn two important things about your sales funnel:

  • The cost to get a visitor, prospect, or lead.
  • The rate at which customers from each stage become revenue-producing customers.

Now, you can make the most of your marketing budget by making campaigns that target potential customers at the point in the funnel with the best return on investment.

3. Figure out how much it costs to run your business.

A CPC ad campaign’s cost per click is just one of many marketing costs. 

You may also have set operational expenditures that your company must budget for, regardless of how big your brand is or how many product-specific campaigns you run for it:

  • Employee/contractor wages and other costs
  • Email marketing tools and CRM software are used to send emails and keep track of things.
  • Website domain name registration and web hosting
  • SEO-related tools and costs

In order to keep the lights on for your marketing team, you’ll have to pay for these mostly-fixed costs. You can spend $20,000 or $200,000 on an ad campaign.

4. Take into account the costs of all product-related marketing.

When you’re getting ready for a new product’s promotional launch, it’s easy to forget about all the money you spent in the months before the launch.

  • Market research
  • Focus groups to get feedback from customers.
  • Testing is done to find the best campaign messaging.

All of these costs are part of your total marketing cost, even though they may not show up on your current campaign’s budget.

Track and measure the ROI

As a business, you should always try to improve your marketing ROI to get more for your money. 

The most important thing is to keep an eye on how well your campaign is doing.

In the Six Sigma method, there are many different ways to improve the way things work. One of these ways is the DMAIC Process, which is a process of continuous improvement and refinement.

  • Define: Your marketing team needs to know which metrics and KPIs connect their work to your business’s goals.
  • Measurement: While your campaign is running, keep an eye on the metrics you set.
  • Analytics: Take a look at the data from the measurement process.
  • Improvement: Change the performance of underperforming campaigns, landing pages, or emails. You can also look to cut underperforming campaigns to focus on activities that make money.
  • Control: This improvement process can be controlled by writing down the steps and making them part of your marketing team’s daily work.

Creating your marketing budget, The last thing to think about. 

Before you start making your company’s marketing budget, there are a few more things to think about:

  • Your company’s maturity to market and your True North channel
  • Remarketing is an integral part of the process.

The maturity of your marketing and the channel of your company

Your marketing budget should be flexible and responsive so that it can change as things work and don’t work for you. 

The goal is to do more of what works best and less of what doesn’t.

It’s essential to figure out your True North channel, the channel that gives you the best results.

Your marketing team can use three stages of marketing maturity to figure out how to spend money on different types of marketing.

Phase 1: You start looking for your central channel. You’ll spend a small amount of your budget on many different channels to see what works.

Phase 2: You’ve found your True North channel, which means you can work hard to maximize your returns until they start to fade away.

Phase 3: If your True North channel is complete, you should slowly try out one or two other channels to spread your efforts.

This is part of the DMAIC continuous improvement process, essential to your marketing team’s long-term success in a more competitive field.

2: The role of remarketing.

Remarketing lets you tailor your message to people already been to your site. 

A lot of people will visit your site but not buy anything. Remarketing is an important and cost-effective way to keep the conversation going with people who know your brand or product but haven’t yet purchased it.

As you read this, we talked about how important it is to put suitable campaigns and marketing materials in front of the right visitors or leads based on where they are in the buying process. 

It adds to that by putting personalized, targeted content before people who have already visited your site. As a bonus, remarketing ads can cost half as much as regular ads, and they can convert more than 50% better than standard ads.


When you make a marketing budget, it includes everything your company needs to spend on advertising and should always be in line with your business’s goals. For example, if your main goal is to make more money, then your marketing budget should be made from the top down to include the resources you need to reach your revenue goals.

It’s also important to spend those resources on promotional activities and marketing channels with the best investment return. If you don’t know what those activities and channels are, start by paying a small amount of money on a lot of different channels to see which ones work best. 

If you know what those activities and channels are, focus your efforts on getting the most out of them until your results decrease.

Remember that your company’s marketing efforts should be flexible and responsive so that you can adapt to changes in performance and always look for the best ROI.

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