How to Plan an Effective Marketing Budget in 2024

Marketing is a core driver of business growth, bringing more traffic, leads, and sales to your company.

But how much should you be spending on marketing? And which channels and strategies should you invest in?

The answer lies in creating a detailed marketing budget.

In this post, we’ll explain the steps you should take to plan your marketing budget and point out some common budgeting mistakes for you to avoid.

But let’s start with some basics.

What Is a Marketing Budget?

A marketing budget outlines how much money you’ll allocate towards marketing your business during a specific time period (typically a quarter or a year).

It can include costs for advertising, content development, email, and social media campaigns, and the human resources and software needed to execute these activities effectively.

The purpose of a marketing budget is to ensure that all your marketing efforts are adequately funded and strategically aligned to help reach your business objectives.

Why Should You Plan a Marketing Budget?

Here are some of the main reasons why planning your marketing expenditures is a good idea:

Strategic Focus

A marketing budget forces you to define which marketing initiatives you think have the best chance of achieving your business goals. 

You can identify these by studying past performance metrics, such as the return on investment (ROI), conversion rates, and overall engagement levels from previous campaigns. 

Analyzing current market trends and competitor strategies can also help you pinpoint the most promising channels to help you grow.

By evaluating the potential impact of various marketing activities, you can prioritize those that are most likely to maximize your ROI

Financial Control

A marketing budget helps you maintain financial control by setting clear spending limits for your team. 

The goal is to ensure that marketing activities remain cost-effective and within the financial constraints of the business. 

A detailed marketing budget clearly outlines where funds will be spent, making it easier to track expenses and hold team members accountable for their respective budget allotments.

Contingency Planning

Budgeting allows you to set aside contingency funds to handle unexpected marketing opportunities or challenges.

This financial buffer means your pre-planned marketing initiatives can continue running smoothly even if unforeseen expenses arise or there’s a need to capitalize on a new market opportunity.

How Much Should You Budget for Marketing?

According to a 2024 Gartner survey, companies spend around 7.7% of revenue on marketing (down from 9.1% in 2023).

But the amount a business sets aside for marketing can vary depending on multiple factors.

For example, more established brands can typically get away with allocating a smaller portion of their revenue to marketing compared with small to medium-sized businesses.

Marketing spend also differs between B2B and B2C businesses. According to the 2024 CMO Survey, B2B companies tend to spend around 5% to 10% of revenue on marketing, while B2C companies hover around the 10% to 15% mark.

There are also big variations between industries. For example, businesses in the consumer packaged goods industry spend 18.5% of their revenue on marketing compared with 1% for the mining and construction sector.

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Ultimately, the amount you choose to spend on marketing depends on your specific business goals, competitive landscape, and market dynamics. That said, around 10% of revenue makes sense for most small to midsize businesses.

How to Plan a Marketing Budget (7 Steps)

Now let’s walk through the steps of creating your marketing budget. 

1. Establish Your Business Goals

The first step is to define the business goals you want your marketing initiatives to support.

Having clarity about where you want to go means you can focus your investment on the channels and resources required to get there.

Start by outlining specific, measurable, achievable, relevant, and time-bound (SMART) goals. These could include increasing website traffic by 25% within a year, generating 1,000 leads per month within six months, or boosting online sales by 15% over the next quarter. 

These goals will dictate which channels and strategies you should prioritize. For example, if your goal is to increase brand awareness, you might focus on increasing your organic search footprint through SEO and boosting engagement on social media. If lead generation is a priority, your budget might lean towards PPC advertising and email marketing.

2. Look At Past Performance

Reviewing which marketing efforts worked well in the past (and which didn’t) can help you make more informed decisions about where to allocate your marketing dollars.

Look at key metrics like ROI, conversion rates, customer acquisition costs, and overall engagement levels. If a certain channel has consistently delivered a high ROI in the past, it might be worth increasing your investment in that area. Conversely, if a channel shows poor historical performance, consider reallocating that budget to more effective strategies.

You should also examine your existing marketing and sales funnels to identify any stages where potential customers are dropping off. By pinpointing the “leakiest” stages of the buyer’s journey, you can determine where additional investment might improve conversion rates and overall funnel efficiency.

For example, if your conversion rates are high but your traffic levels are low, consider investing more in top-of-the-funnel content to attract a broader audience.

On the other hand, if customers are abandoning carts or not completing purchases, it might be worth allocating more budget to improving your website’s user experience or running new promotions. 

3. Study the Market

Knowing which marketing strategies your competitors use can also help you make more informed decisions about where to allocate your budget.

For example, if a competitor is dominating organic search results with a strong SEO strategy, you might decide to invest more in content marketing and SEO to compete directly with them. 

Alternatively, if the market seems saturated with competitors focusing on PPC advertising, you might find more success by investing in underutilized channels like influencer marketing or podcasts.

4. Identify Your Priority Channels

Once you understand which channels have worked well in the past, offer a realistic chance for competitive advantage, and align with your business objectives, you can prioritize these channels in your marketing budget.

Some common digital marketing channels you might consider include:

• SEO: Enhances your website’s organic visibility in search engine results, helping you attract more qualified traffic.
• Content marketing: Involves creating and distributing valuable content to attract and engage your target audience.
• Social media marketing: Uses social platforms like Facebook, Instagram, and TikTok to build brand awareness and engage your audience.
• Email marketing: Focuses on sending targeted emails to nurture leads and maintain customer relationships.
• PPC advertising: Involves paying for ads that appear on search engines or social media platforms, driving immediate traffic and leads.
• Influencer marketing: Builds collaborative partnerships with influencers so you can reach their followers and build brand credibility.
• Affiliate marketing: Involves partnering with affiliates who promote your products and earn a commission on sales.

5. Determine Your Outsourcing Needs

Next, you’ll need to assess which aspects of your marketing plan can be handled internally and which may require external expertise.

For example, you may have an in-house team that excels at creating content and managing social media but lacks the specialized skills needed for SEO or PPC management.

When it comes to outsourcing marketing activities, you have three main options:

1. Freelancers

Freelancers are independent professionals who offer specialized skills on a project-by-project basis. This makes them a flexible and cost-effective option for smaller tasks or short-term projects. They can provide expertise in specific areas like web development, graphic design, or content writing.

One of the main benefits of hiring freelancers is their cost-effectiveness. You only pay for the work done, avoiding the overhead costs associated with full-time employees. Freelancers also offer flexibility, allowing you to scale up or down based on your changing needs.  

However, freelancers may have multiple clients, which can impact their availability and responsiveness—potentially leading to delays. Ensuring consistency in quality and brand messaging can also be challenging when working with multiple freelancers, requiring clear communication and strong project management.

2. Generalist Agencies

Generalist agencies provide a wide range of marketing services under one roof. 

These agencies offer comprehensive service packages, which can include strategy development, content creation, SEO, PPC, social media management, and more. This integrated approach often leads to better alignment between channels, ultimately enhancing the overall effectiveness of your marketing campaigns. Moreover, dealing with one primary service provider streamlines communication and saves you the effort of managing multiple vendors.

Generalist agencies tend to be significantly more expensive than freelancers and typically require a monthly retainer fee. Also, while they offer a broad range of services, they won’t always have the deep expertise needed to excel in highly specialized areas.

3. Specialist Agencies

Specialist agencies focus on specific marketing areas—such as SEO, PPC, or social media marketing—offering in-depth knowledge and advanced strategies in their particular field. 

The main benefit of working with specialist agencies is their specialized focus, which often translates into higher quality work and faster results. They are ideal for businesses that need a high level of skill and focus in one area.

Specialist agencies can be expensive, often charging premium prices. And since they only focus on one aspect of your marketing strategy, you may need to work with multiple agencies to cover all your marketing needs.

6. Allocate a Budget to Different Channels

Now that you have identified your priority channels, it’s time to allocate your marketing budget accordingly.

While it makes perfect sense to allocate a larger portion to channels that promise the best ROI, it’s also worth setting aside a portion of your budget for experimenting with new channels. 

Testing new strategies not only plants the seeds for future opportunities but also provides a backup source of traffic and revenue should your primary channels underperform.

7. Set Aside a Contingency Fund

Finally, it’s a good idea to build some redundancy into your marketing budget.

A financial buffer ensures your marketing plans can continue uninterrupted, even when unforeseen expenses arise, or new opportunities present themselves.

For example, if a campaign underperforms, a contingency fund of 5% to 10% of your marketing budget could help you pivot quickly and try a different approach without straining your company’s finances.

Mistakes to Avoid When Planning a Marketing Budget

Now that you know the fundamentals of creating a marketing budget, here are a few common pitfalls to avoid during the planning process.

Underestimating the Cost of Marketing Activities

Underestimating the costs associated with various marketing activities can lead to budget shortfalls. Be realistic about the expenses involved in executing your marketing strategies effectively. Consider all potential costs, including tools, software, personnel, and advertising fees. 

Spreading Your Budget Too Thin

Trying to invest in too many channels at once can dilute your efforts and reduce the effectiveness of your campaigns. Focus on the most promising channels and strategies to maximize ROI. By concentrating your budget on fewer high-impact areas, you have a better chance of creating more robust and successful campaigns.

Failing to Measure ROI

Without measuring the ROI of your marketing efforts, you cannot determine what is and isn’t working. Regularly assess campaign performance and adjust your budget accordingly. Using analytics tools and setting clear KPIs will help you track your progress and spot areas for improvement.

Overlooking Existing Customers

Exclusively focusing on acquiring new customers can be a costly mistake. After all, it costs more to acquire new customers than to retain the ones you already have. Allocate part of your budget to customer retention strategies, such as loyalty programs and personalized marketing.

Using the Same Budget As Before

Using the same marketing budget year after year without considering changes in your business, market conditions, and consumer preferences can limit your growth. Adjust your budget annually based on a thorough analysis of past performance, current goals, and market trends. 

Final Thoughts

Having a carefully planned marketing budget is essential to driving business growth.

Without it, your marketing efforts can become disorganized and inefficient, leading to wasted resources and missed opportunities.

Now it’s time to implement the tips outlined above to ensure your marketing efforts are well-funded, aligned with your business objectives, and capable of delivering impactful results.