All posts

Breaking Down Your Digital Marketing Budget

According to data gathered by Bright Local , the average small to medium business spends about $400 monthly on marketing. About 46% of that money goes to digital marketing. Big companies with larger revenues spend far more, and the biggest spenders are companies in the consumer packaged goods, co
Parker Dietz
March 4, 2022
April 11, 2024

According to data gathered by Bright Local, the average small to medium business spends about $400 monthly on marketing. About 46% of that money goes to digital marketing. Big companies with larger revenues spend far more, and the biggest spenders are companies in the consumer packaged goods, consumer services, and tech software industries.

Regardless of your industry or company size, having a marketing budget is crucial. Without a budget, you could find your company underspending or overspending on marketing, leading to unsatisfactory returns on investment.

Do you need help creating a usable digital marketing budget? If so, we’ve put together a digital marketing budget breakdown, starting with how to plan your marketing budget.

How to Budget Marketing Expenses

Digital marketing spend (by industry) typically varies because some industries generate more revenue than others. For example, the software industry currently generates the most revenue. That’s why companies in this sector can afford to spend 15% of their revenue on marketing. The only industry that spends more on marketing is the consumer packaged goods sector.

Before creating a budget for your company, you must first perform industry research to discover how much your competitors spend on marketing. Your research should also reveal the most effective marketing tactics for businesses in your industry.

Knowing your competitors' marketing spend and tactics will give you an idea of what you might have to spend to gain brand visibility over competing brands. If digital marketing is the best option for promoting your brand, here’s how to develop an accurate digital marketing budget breakdown:

  • Clarify Your Marketing Goals: You must have clearly stated goals that you hope to achieve by the end of your marketing campaign. Your stated goals will simplify calculating how much you will need to spend to achieve your objectives. Also, having stated goals will simplify allocating resources and formulating plans towards fulfilling those goals.
  • Know Your Target Audience: Your target audience is the group of people you hope to reach with your digital marketing campaign. Knowing and understanding your audience's needs, preferences, and personalities will help you identify the right content to make to engage and convert prospects. You can then build a budget for content creation.
  • Identify Viable Digital Marketing Options: Digital marketing is most effective when you combine tactics, like social media marketing, PPC, SEO, and email marketing. Use a digital marketing combination that fits your budget and has a track record of winning over prospects in your niche.

What Percentage of Revenue Should Be Spent on Marketing?

The accepted practice in most industries is spending 7 to 10% of company revenue on marketing. Spending under 10% of revenue on marketing reduces the risk of overspending without getting tangible returns on investment.

Note that the exact percentage of revenue to spend on marketing will depend on your industry, target audience, marketing channels, and marketing goals. These factors will dictate your marketing expenses, which should not exceed 10% of your revenue if you want to play it safe. The biggest marketing expenses typically include the cost of:

  • Marketing content creation
  • Marketing staff financing
  • Marketing training, analytics, and research
  • Ad payments

How to Allocate Marketing Budgets across Channels

If you look at digital marketing spend (by industry), you will see that about 50% of marketing budgets go to campaign planning and content creation. About 20% to 30% goes to paid advertising, while software and tools take about 10%.

Campaign planning and content creation take 40% to 50% of budgets because quality content is at the center of every successful marketing campaign. On the other hand, planning ensures that marketing content reaches the right target audience on the right platforms.

Below are some of the digital marketing channels businesses spend on:

Search Engine Optimization

SEO involves optimizing your website and content to appear in relevant search engine results. With SEO, you can increase your organic website traffic and lead generation. The cost of SEO will depend on if you do it in-house or outsource to an agency. The goal and duration of an SEO campaign will also affect its cost. Small businesses typically spend about $750 to $2000 per month on SEO.

Social Media

Billions of people use social media every day, making it an excellent platform for reaching and engaging new customers and boosting brand awareness. Over the years, social media marketing budgets have grown, and businesses now spend about 11% to 20% of their marketing budget on social media.

Pay-Per-Click (PPC) Advertising

Properly executed PPC advertising can be a potent tool for increasing brand visibility and generating valuable leads. Some experts recommend allocating 5% of a marketing budget to PPC and adjusting the budget based on the PPC campaign's results.

For example, if spending 5% of your budget on PPC brought in a hundred new customers, you could double your spending if your goal is 200 new customers. The average small or medium-sized business currently spends about $9,000 to $10,000 per month on PPC.

Content Marketing

According to data gathered by WP Forms, brands that blog regularly get 55% more web traffic. More web traffic means more leads that could convert into customers. Content marketing involves creating and sharing content via websites or social media to promote your brand and products or educate your audience.

According to Forbes, 25% to 30% of your marketing budget should be content marketing. The figure may seem steep, but it’s a worthwhile investment, especially since all your other digital marketing campaigns will need quality content.

You can find the ideal type of content for each campaign by performing content testing. Using the right content for each marketing campaign will increase the chances of viewers getting engaged and taking the actions you want.

Email Marketing

Email marketing is among the oldest forms of digital marketing, and it still delivers impressive results when done correctly. While some experts recommend allocating about 16% of your marketing budget to email marketing, the right amount to spend will depend on your desired results.

For instance, the more email subscribers you target, the more email marketing may cost. Also, outsourcing email marketing will cost more than handling it in-house.

Marketing Automation

In 2021, 76% of companies reported using marketing automation to make managing digital marketing less tedious. An excellent alternative to investing in automation is hiring experts for fully managed digital marketing services.

Allocating Budget to Digital

While 7% to 10% of your revenue is the recommended amount to invest in marketing, not all of it goes to digital marketing. Some companies dedicate a sizeable chunk of their marketing budget to traditional marketing strategies like TV and billboard ads.

However, digital marketing costs less than traditional marketing and offers a far more superior return on investment. That’s because digital marketing is more engaging and capable of reaching a larger audience. Even better, unlike traditional marketing, you can tailor digital marketing to target audiences who are more likely to convert.

Since digital marketing is so effective, you should dedicate at least half of your marketing budget to it. Do you have doubts about investing that much in digital marketing? If so, note that a whopping 83% of businesses in 2018 believed that digital marketing helped them achieve their goals. That number has only grown since then.

Marketing Budget Allocation Template

A marketing budget is a written document that states the amount you plan on spending on brand or product promotion. Depending on your preferences or business plan, you could have a monthly, quarterly, or yearly marketing budget.

Having a budget will give you a clear picture of your marketing expenses and a clear roadmap for spending. It will also provide you with the means to measure your return on investment. If you need a marketing budget breakdown example, you can download a free marketing budget template at SmartSheet.

How Will Your Digital Marketing Budget Look?

You now know what your digital marketing budget breakdown should look like and how to create one. If you want your digital marketing to be more cost-effective, let Cohley manage your biggest digital marketing expense – content creation. We have years of experience providing brands with content optimized and tailored to grab the attention of their unique target audiences and drive growth.

Contact us today to book a consultation and learn more about how our content creators can give you a competitive edge in your niche.

Parker Dietz
Head of Content
With a wealth of knowledge about competitors and pricing, Parker is all about exploring the best way to communicate Cohley's benefits. Outside of work, Parker enjoys poorly playing guitar at parties, watching every Adam Sandler movie ever made, and eating Arabic food.