We regularly update the following post with the latest information pertaining to Digital Marketing Budgets.
Last update: January 2022
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?
- How have companies adjusted their marketing spending due to the ongoing crisis associated with COVID-19?
The answers to these questions come from reliable sources including :
- 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
- 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)
Marketing budgets vary by industry. Looking for specific information for one of the industries we specialize in? Check out our articles on:
Changes In Total Marketing Budgets
First, a look at how marketing budgets are changing.
Each year in the CMO Survey, top marketers are asked how their marketing spend is expected to change in the upcoming year.
In large part, marketing budgets remained relatively consistent or increased compared to the previous year for the majority of participants. Then a global pandemic hit, and pretty much everything as we knew it changed.
The February 2021 CMO survey indicated that marketing budgets were expected to shrink by 3.9% in the next 12 months compared to the previous year.
However, the latest survey from August 2021 showed marketing spending growth returning to levels similar to pre-pandemic growth, with an even more optimistic projection that growth in the next 12 months could far outpace any year in the past decade.
You can download the full CMO Survey reports here.
Marketing budgets as a percent of the overall firm budget have remained fairly steady over the past several years, as shown in the chart below. Marketing budgets as a percentage of firm budgets were projected to reach 12.1% in 2021 according to the August 2021 CMO Survey.
However, the survey showed a drop in the percentage of revenue that marketing budget accounted for. After reaching a high of 13.2% of company revenue, they dipped to 8.6% in the August 2021 report. This is considered to be a reflection of rising firm revenue that outpaced marketing spend during this period of inflation and continuing supply and demand considerations.
Marketing budget as a percent of total revenue can vary dramatically by industry. While the B2C product sector devotes an average of 13.7% of revenue to marketing budgets, the B2B product sector reports a much lower 6.7% of revenue dedicated to marketing spend.
What is included in marketing budgets?
One of the difficulties in providing a general budget recommendation is that not all companies are consistent with what they include in their marketing budget. While some companies include any marketing, and even sales-related, expenses others would categorize some of those expenses separately as a part of their total firm budget. The chart below illustrates these inconsistencies, and shows the marketing expenses most commonly included.
|Direct expenses of marketing activities||95.7%|
|Social media marketing||92.9%|
|Overhead costs associated with marketing||69%|
A 2021 study by Gartner reported that marketing leaders planned to spend 26.6% of their marketing budget on marketing technology in 2021, making it the single largest area of investment for marketers, followed by paid media, labor, and agencies. Email marketing platforms, web content management and digital marketing analytics platforms were the highest martech priorities.
How to Allocate Your Marketing Budget
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.
Reports from Forrester Research, eMarketer and Gartner show the estimated allocation of marketing funds offline vs. online and across the digital channels.
Here are some conclusions from those reports:
- A breakdown of marketing budget across channels illustrated the dominance of digital spending, with 72.2% of investment going to digital channels according to Gartner's survey.
- The CMO Survey found digital spending to be dominant, but slightly less so, with 57.9% of marketing budget devoted to digital marketing activities.
- Owned digital channels garnered the highest budget allocation, with 29.5% of budget going to website, email and mobile channels. Earned digital was the second highest category, representing spending on social media and SEO.
- Online video has represented the highest growth category, with anticipated investment more than doubling between 2016 and 2021
- Social media advertising investments has continued to grow, with a 17% compound annual growth rate from 2016 to 2021.
- Mobile marketing has grown to a point that it’s no longer tracked separately in the forecast and it’s presumed to be considered across all channels
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.
Viewed a different way, here's how CMOs divided their marketing budgets among marketing programs and operational areas.
Which Marketing Strategies & Tactics Are Getting The Best Results?
Email marketing still holds the crown with the highest ROI reported, due in part to its relatively low cost.
Paid digital advertising on search and social media also produces impressive ROI results, and investments in SEO can pay off with a very high rate of return, albeit at a slower pace.
Marketing technologies and automation are proving effective at bringing together the most effective marketing tactics (email marketing, organic search, social media marketing and content marketing) to achieve better results.
Which Social Media Channels Should I Invest In?
A Pew Research study from 2021 shows YouTube and Facebook maintaining their dominance in social media platform usage in the United States. While Facebook has leveled off in usage, it remains an important channel for many marketers despite some recent controversies.
While there are no direct investment assessments associated with this particular study, it does show noteworthy trends among the major social channels, and suggests an emphasis should be made on YouTube, Facebook and Instagram channels for social advertising. Instagram has steadily grown in usage, and it makes sense for many business types to focus some of their ad dollars on these three platforms.
Many of the lesser-used social platforms can be effective tools in an advertiser's toolbelt as well, depending on the target audience.
Changes In Social Media Platform Investments
Social media ad spending is expected to reach an astounding $56 billion in 2022, according to an eMarketer survey in late 2020.
In a study by Statista published in August 2021, Facebook represented the largest share of that paid social pie, with 93% of marketers currently investing in Facebook. That is compared to 91% reported in 2019, when 26% of survey respondents reported that they planned to spend less on Facebook in the coming year. It appears that despite controversy and changed to the platform, Facebook remains a platform where almost all marketers are paying to play.
Instagram, by comparison, saw an increase in usage from 69% in 2019 to 78% in 2021. In the B2B space, LinkedIn has come on strong, rising from 45% usage in 2019 to 61% in 2021.
Changes in Traditional Versus Digital Marketing Spend
This chart, from cmosurvey.org in February 2021, shows the sharp contrast between digital growth and offline decline.
For the past several years, 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.
Businesses are shifting their marketing spend in a big way, and that isn't slowing down. 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 projected the following in 2018:
A few years back, digital media spending surpassed TV advertising spending for the first time. That gap has rapidly widened—2019 marked another significant milestone, with digital ad spending surpassing all traditional media ad spend combined for the first time.
By 2021, digital spend was projected to more than double television spending. The point is, if you're not investing heavily in digital marketing, you're being left behind by your competitors and you're missing a huge opportunity for visibility to your prospects and customers.
Of course, not much was left untouched by the upheaval of 2020, so eMarketer published a report in October 2020 on the changes to the forecast for digital ad spending. The chart below tracks the progression in the forecast, showing a course correction in June 2020, but ultimately landing on an even more optimistic picture of digital advertising by 2023.
Percentage Of Marketing Budget Spent On Digital
Digital spend is only a portion of total marketing spend for most businesses. 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.
While a recent Forrester Research report projected that digital ad spending would make up 46% of all ad spend in 2021, this number can vary depending on a variety of factors including industry, growth plans and local market.
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.
Across all sectors, digital marketing budgets have increased consistently, while traditional channels have lost ground. However, there are occasional pockets of growth in traditional marketing, such as the one positive growth area for B2B Product industries, as shown below from the February 2020 chart.
B2B companies tend to be slower to transition to a more digital model, but even they have shown double-digit growth in digital investments, and made larger shifts towards digital in 2020 and 2021 due to the restrictions on in-person events.
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 2021.
Marketing budget as percent of firm budget and company revenues
The main takeaways from this survey are as follows:
- For B2B firms, marketing budgets as a % of firm revenue fell within the 6-8% range
- For B2C firms, marketing budgets as a % of firm revenue were around 8-14%
- Marketing budgets as a % of overall firm budgets have been fairly consistent for B2B firms the past few years, in the 9-11% range, but average much higher for B2C companies, up to as much as 20%.
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 years 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 accompany them.
That being said, the overarching themes from the above studies are as follows:
- Marketing budgets are increasing over the past several years
- More money is being spent on digital, mostly at the expense of traditional advertising channels
- Total marketing budgets are between 6 to 14% 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
- More mature marketers tend to slow their marketing spend as better results measurement enables them to spend smarter, and they often acquire more brand awareness
- Search and Display marketing represent the lion’s share of digital budgets
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.
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