What’s the right amount to spend on a marketing budget?

How much should we be spending on our marketing budget?

O ne way or another, it’s a question that comes up again and again. The reason? Business directors know what they currently spend on marketing, but don’t necessarily know if it’s actually the correct amount to spend on marketing.

Is it too much? Too little? There really isn’t a lot of guidance out there.

Nor, have we noticed, is there even much discussion of the question.

So how much should a business be spending on marketing?

Is the answer... 42?

In fact, a simple heuristic rule-of-thumb—based on spending 25 years working with businesses on marketing strategies and marketing plans—goes a long way towards answering the question.

And it’s this: for the vast majority of small and medium-sized businesses, a marketing spend of around 3% of sales revenues is always about right.

Time and again, we have sat around boardroom tables and worked through a client’s marketing strategy and its implementation plan, and we always seem to land back at that figure of about 3% of turnover.

If we start with a budget spending less, we can see we'd be leaving profitable sales opportunities untapped.

If we start with a budget spending significantly more, it quickly becomes clear a good chunk of that spend is likely to be wasteful.

A business targeting faster growth, for instance, might spend 5% of sales revenues on marketing, but it's understood that its is likely to involve a fair amount of hit-and-hope marketing activity.

About 3% of turnover, most of the time, over the long-run, is just about right.

Run rate

But why is 3% about right?

Of course, it’s not an exact science. But when we look at a typical business—especially one in the £2–10 million range—it turns out that 3% roughly corresponds with the organisation’s natural ability to manage its pipeline.

3% delivers about the right level of marketing resource and activity to generate enough leads to keep the sales team fully occupied. Which in turn creates enough converted leads for the delivery side of the organisation to service.

Challenged assumptions

The secret then, is to translate that marketing spend of 3% or so into a marketing plan that is focused, effective and delivers results that can be measured.

And with that figure on the table, we can straightaway envisage some interesting conversations:

- Which marketing activities really ought to make up that 3%?
- If current spend is significantly above 3%, which activities are likely to be ineffective or wasteful?
- If current spend is significantly below 3%, which opportunities are presently untapped?

Questions such as these cut straight to the heart of any marketing strategy and are linked to profit.

When to spend

There's a timing point worth making too, and it matters more than most people expect.

The marketing year really splits into two halves. The first, from 1 January to 30 June, is a clean run at your customers. Bar the first week of January and a bit of staggered holiday around Easter, you've got a solid six months when decisions get made.

From 1 July, the warm weather arrives and half your audience is already mentally on holiday. Anything landing in the summer tends to get parked until September. So the year quietly narrows to a single sprint, roughly 12 weeks from 1 September to late-November, when everyone's back, focused and buying. Once December arrives, we all turn our attention to Christmas.

So the smart move is to know where that sprint sits and be ready for it.

Start the conversation

At MarFrame, we’re not afraid to speak plainly and challenge you on a few assumptions. After all, your growth and profit is our business.

Where—and how—should you be spending your marketing budget? How can you determine the effectiveness of that marketing spend? Which activities aren’t generating an appropriate return?

For the answers, please talk to us. 

Call us on 01494 726 535 or email us at info@marframe.com