We regularly update the following post with the latest information pertaining to Digital Marketing Budgets.
Last update: January 2020
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
- 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:
Overall Changes In Total Marketing Budgets
First, a look at how marketing budgets are changing.
For ten consecutive years in the CMO Survey, top marketers were asked how their marketing spend was expected to change in the upcoming year.
Since 2009, marketing budgets remained relatively consistent or increased compared to the previous year for the majority of participants.
The most recent CMO survey indicated that marketing budgets were expected to grow by 8.7% in the next year, nearly reaching an eight year high.
The report above from cmosurvey.org shows the variation in the expected rate of increase in marketing spend, not the actual increase. The largest increase in projected marketing spend occurred shortly after the recession of the late 2000’s, but continues to fluctuate between 4 and 10%.
You can download the full report here.
The Gartner CMO Spend Survey for 2019-2020 found that 61% of CMOs expected their marketing budgets to increase in 2020.
Marketing budgets as a percent of the overall firm budget has remained even more consistent, as shown in the chart below. Consistent with the increase in marketing budgets overall, marketing budgets as a percentage of firm budgets was projected to reach 12% in 2020 according to the CMO Survey, matching the highest level they've seen.
Marketing spending as a percentage of revenue tends to fluctuate, but generally hovers between 6.5% to 10%, with the highest percentage again coming from B2C service companies followed by B2C products.
The latest CMO survey showed 9.8% of revenue for the average marketing spend, with B2C service companies devoting 15.6% of revenue to marketing, and B2B product companies spending only 8.6% of revenue.
The Gartner CMO Survey shows similar numbers, with marketing expense budgets of 10.5% of company revenue.
The chart below shows the wide variation by industry in marketing budget as a percent of total revenue.
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 budget. The chart below illustrates these inconsistencies, and shows the marketing expenses most commonly included.
The 2019 study by Gartner reported that marketing leaders planned to spend 26% of their marketing budget on marketing technology in 2020 (down from 29% in 2019), making it the single largest area of investment for marketers, followed by labor, agencies and paid media. Email marketing platforms, web content management and digital marketing analytics platforms were the highest martech priorities.
The August 2019 CMO Survey shows planned spending on marketing training and development reaching a 5 year high, with 5.8% of marketing budgets dedicated to training and development.
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.
- In 2020, the average firm was expected to allocate 45% of their total marketing budget to online
- Search engine marketing will capture the largest share of online spend with online display (banner ads, online video, etc.) taking the second largest share
- Online video will represent the highest growth category, with the anticipated investment more than doubling 2016 numbers by 2021
- Social media advertising investments will continue to grow, with a 17% compound annual growth rate from 2016 to 2021. Social media spending overall averaged 11-12% of total marketing budget in the August 2019 CMO Survey.
- 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
- Digital marketing is pacing at an 11% compound annual growth rate between 2016 and 2021 with the biggest growth occurring in online video.
- Investment in paid search, display advertising, social media advertising, online video advertising and email marketing is predicted to account for 46% of all advertising by 2021.
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.
The Gartner CMO Spend Survey found that 26% of marketing budgets were spent on paid media, and when that was broken down by category, digital paid media accounted for 16% of total marketing budgets.
Which Marketing Strategies & Tactics Are Getting The Best Results?
In a survey of 2,500 digital marketers, respondents reported on what marketing activities generated the best ROI. This survey is from 2017, but channels have continued to show similar trends.
Email marketing still leads the way with the highest percentage of Excellent and Good ROI results reported, with social media marketing following closely behind.
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 2019 shows Facebook maintaining their dominance in social media platform usage in the United States. And while Facebook has leveled off in usage, it remains an important channel for many marketers.
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 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 two platforms.
YouTube, while not a traditional social channel, is used by 73% of US adults, and a whopping 94% of 18-to-24 year olds. It can be an effective tool in an advertiser's toolbelt as well, depending on the target audience.
Expected Changes In Social Media Platform Investments
In Hanapin Marketing's 2019 Paid Social report, 97% of marketers are investing in paid social advertising, up 10% from the year before.
Facebook represents the largest share of that paid social pie, with 91% of marketers currently investing in Facebook, but 26% plan to spend less on Facebook in the coming year. Facebook has become a formidable competitor to paid search, but has weathered some controversy and changes to their ad platform in the past year.
Instagram, by comparison, expect to see increased investments from almost half of respondents (46%). 51% of marketers expected to spend more on YouTube, which has become more direct response focused. Snapchat, which has a greener ad platform, was at the bottom of the list, with only 6% of respondents expecting to increase investments into 2020.
Changes in Traditional Versus Digital Marketing Spend
This chart, also from cmosurvey.org, shows the sharp contrast between digital growth and offline decline.
For 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.
A few years back, the chart below from eMarketer projected 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.”
This marked the first time in history digital spend surpassed TV ad spend in the US.
And the gap has only widened—by 2020, digital spend will surpass television by 36%.
An April 2019 report from eMarketer showed an accelerated timeline for digital advertising growth. They now predict a significant milestone to happen this year, with digital ad spending surpassing all traditional media ad spend combined for the first time.
That online growth shows no signs of tapering off, with digital ad spend projected to account for as much as 66.8% of total media ad spending 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 the latest Forrester Research report projects that digital marketing spending will make up 45% of all ad spend in 2020, 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.
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 2019.
Marketing budget as percent of firm budget
Marketing spending as percent of company revenues
The main takeaways from this survey are as follows:
- For B2B firms, marketing budgets as a % of firm revenue fell within the 8-9% range
- For B2C firms, marketing budgets as a % of firm revenue were around 9-16%
- 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 are expected to increase in the next 12 months for B2C companies, up to as much as 16%.
[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 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 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 8 and 16% 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.
- Search and Display marketing represent the lion’s share of digital budget
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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