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How Much Should You Budget For Marketing In 2017?

Chris Leone   by Chris Leone August 29, 2016

We regularly update the following post with the latest information pertaining to Digital Marketing Budgets.

Last update: August 2016

This article provides information that can guide you about how to budget for marketing and where to invest your marketing dollars.

Included in this article are:

  • How much are companies spending on marketing?
  • Where are marketing dollars invested offline and online?
  • What marketing strategies and tactics are getting results?

The answers to these questions come from a few reliable sources:

  • an annual survey of Chief Marketing Officers (CMOs) from a variety of industry sectors and firm sizes
  • a leading research group report about interactive (digital/online) marketing trends and predictions 
  • other leading digital marketing research firms.

This post is broken down into the following sections:

  • Overall Changes In Total Marketing Budgets
  • How To Allocate Marketing Budgets Across Channels
  • Which Marketing Strategies & Tactics Are Getting The Best Results?
  • Changes in Traditional Versus Digital Marketing Spend
  • Expected Changes In Marketing Budgets
  • What Percentage of Marketing Budget Spent On Digital?
  • How Much Should Your Firm Budget For Marketing?

(short on time? Skip to the bottom for the tl;dr)


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Overall Changes In Total Marketing Budgets

First, a look at how marketing budgets are changing.

Overall_Marketing_Budget_Change.png

For five consecutive years, agencies were asked how their clients marketing spend was expected to change in the upcoming year.

Since 2011, marketing budgets remained consistent or increased compared to the previous year for at least 85% of respondents.

With no evidence to suggest this trend will change, 2017 marketing budgets are expected to remain consistent with 2016 levels or increase.

You can download the full report here.

How To Allocate Marketing Budgets Across Channels

The next question to answer is how to allocate marketing budgets across channels – offline and online - and how to spread the online investment across the various online/digital channels. 

The next question to answer is how to allocate marketing budgets across channels – offline and online - and how to spread the online investment across the various online/digital channels. 

A report from Forrester Research shows the estimated allocation of marketing funds offline vs. online and across the digital channels.

Here are some conclusions from that report:

  • In 2016, the average firm was expected to allocate 30% of their marketing budget to online, this rate is expected to grow to 35% by 2019
  • Search engine marketing will capture the largest share of online spend with online display (banner ads, online video, etc.) taking the second largest share
  • Social media investments will continue to grow as an overall share of online spend, but will only represent about 15% of the total online spend
  • Mobile marketing has grown to a point that it’s no longer tracked in the forecast and it’s presumed to be considered across all channels
Conclusions from the 2014 report (for comparison):
  • 29% of a marketing budget was allocated to online/digital channels
  • Search engine marketing (SEO & SEM) captured the largest share of online spend at 47% or about 14% of the firm’s total marketing budget
  • Online display advertising (banner ads, remarketing & retargeting) captured the next biggest share of the online spend at about 34% of total online spend and about 10% of the total marketing budget
  • Social media investments were estimated at 6% of total online spend and a bit less than 2% of the total marketing budget
  • Mobile garnered about 10% of the total digital marketing budget and slightly less than 3% of the total marketing budget.

The chart below shows strong increases in digital channel investment. Of the five digital tactics represented in the report, each expected to see at least a 42% increase in investment.

Marketing_Spend_by_Channel.png

Traditional channels did not fare nearly as well. Print, radio, and television were expected to see a net decrease in total marketing investments.

Once again, these are averages.

How marketing funds are ultimately allocated is driven by the nature of the business, the competitive marketplace, and how target customers behave through the buying funnel.

Which Marketing Strategies & Tactics Are Getting The Best Results?

In these recent surveys by leading digital marketing research firms, respondents reported on what marketing activities generated the best ROI.

The charts below provide some answers to this question. This survey was conducted in 2014:

How do you rate the following channels in terms of return on investment?

Marketing technologies and automation are proving effective at bringing together the most effective marketing tactics (email marketing, organic search, and content marketing) to achieve better results.

Expected Changes In Total Marketing Budgets

Changes_In_Marketing_Budgets.png

The report above from cmosurvey.org show a steady, single digit increase in marketing spend over the following twelve months. The largest increase in projected marketing spend occurred shortly after the recession of the late 2000’s, but continues to fluctuate between 4 and 8%.

Changes in Traditional Versus Digital Marketing Spend

Traditional_Versus_Digital_Ad_Spend.png

This chart, also from cmosurvey.org, shows the sharp contrast between digital growth and offline decline.

For nearly a half decade, investments in traditional advertising have consistently dropped by single digit percentages each year.

Digital marketing spend, by comparison, has consistently grown by double digit increments year after year.

This means businesses are shifting their marketing spend.

What used to be spent on radio, television, and newspaper is now being spent on search, email, and social.

This trend is expected to continue for the next several years.

The chart below from eMarketer projects the following: “in 2017, TV ad spending will total $72.01 billion, or 35.8% of total media ad spending in the US. Meanwhile, total digital ad spending in 2017 will equal $77.37 billion, or 38.4% of total ad spending.”

Digital_versus_TV-2.gif

This marks the first time in history digital spend surpassed TV ad spend in the US.

And the gap will only widen - by 2020, digital spend will surpass television by 36%.

Percentage Of Marketing Budget Spent On Digital

Digital spend is only a portion of total marketing spend for most businesses. For 50% of businesses surveyed, digital represents less than 40% of total marketing spend.

Percentage_Of_Marketing_Budget_Spent_On_Digital.png

Businesses who rely more heavily on the internet to generate sales (e.g. an ecommerce business), invest a greater percentage of their marketing budget towards digital.

For more traditional businesses, which rely on offline AND online activity to fill the sales funnel, a healthy mix of marketing investment is to be expected.

Source: Econsultancy Digital Report

How Much Should Your Firm Budget For Marketing?

The CMO survey offers some answers. In the charts below you’ll see how marketing professionals from all types of firms responded to this question in 2015 compared to 2012-2013.

who has the biggest marketing budgets?

The main takeaways from this survey are as follows:

  • For B2B firms, marketing budgets as a % of firm revenue fell within the 7-8% range
  • For B2C firms, marketing budgets as a % of firm revenue were around 9%.
  • Businesses generating less than $25 million/yr in revenue were the only business to spend more than 10% of revenue on marketing. 

Marketing Spending From 2012-2013:

As a point of comparison, here is data from 2012-2013.

Marketing Budgets 2014

Notable Changes In Marketing Budgets Over The Last Four Years:

  • Across both economic sectors (B2B & B2C), marketing budgets have decreased from last year
  • Marketing budgets for firms selling products to the consumer marketplace (B2C) increased from last year

Based on these results, we see that B2B marketing spending has increased over the past couple years, whereas B2C marketing spending has dropped slightly.

[RELATED: The Top B2B Digital Marketing Strategies]

It is important to note that these percentages represent the total marketing investment, not just advertising or media spend.

They include things like marketing staffs, customer relationship management, investments paid to agencies and other outside suppliers, advertising costs, media spend, etc.

Firms seeking to grow market share will likely be on the high side of these averages vs. firms planning for modest growth, which may be on the lower side.

Additionally, the competitive nature of a certain marketplace will influence where a particular firm falls among these average figures.

Marketing & Digital Budget Summary - What Does It All Mean?

We purposely compile surveys from a variety of sources over a number of year to give you an objective perspective, and appropriate context. 

The conclusions of each survey are not always consistent.

This inconsistency represents the diversity of business needs and the marketing strategy that accompanies it.

That being said, the overarching themes from the above studies are as follows:

  • Marketing budgets are increasing
  • More money is being spent on digital, at the expense of traditional advertising channels
  • Total marketing budgets are between 7 and 12% of total revenue
  • B2Cs generally spend more on marketing compared to B2Bs
  • Smaller companies spend more on marketing as a percentage of their total revenue
  • Search and Display marketing represent the lion’s share of digital budget
Bringing together the data from these credible sources in the marketing community should help you determine how much to spend on marketing, and where to apply those investments.

At WebStrategies, Inc, we know your marketing investments should result in profitable sales.

Learn more about how online/digital marketing methods such as inbound marketing, Google Analytics, display advertising, and web design and development can help you achieve your sales goals.

Where do you get the most bang for your buck when it comes to your marketing budget? Let us know in the comments section below.

You may also be interested in ...

What Is A Good Marketing ROI?
What Is A Good Cost Per Click?
How To Cross Sell Using Facebook, Google, and Pop-Ups


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As Chief Operations Officer, Chris is responsible for leading all the day-to-day operations of WebStrategies. His work has been featured on the Google Analytics and Hubspot blogs, and he’s a regular columnist for the Richmond Times Dispatch.

 

Topics: Advertising, Internet Marketing, Inbound Marketing, Online Marketing, Marketing Automation, Social Media, Display Advertising, Digital Marketing

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