It’s the age old question — how much should you budget for digital marketing?
Sometimes people give you a flat number estimate.
Sometimes they tell you what they’re spending.
But somehow, none of it makes it easier for you to decide how to set your marketing budget.
Luckily, you’ve come to the right place. I’ll give you all the information you need to make sense of setting your digital marketing budget.
How much should a business budget for digital marketing?
The simple, repeated answer is to budget 7% to 12% of total annual company revenue for marketing.
But there’s a little more to it than that.
You need to factor in things like you industry and growth stage in order to set the most effective budget:
- Industry: If you’re in a highly competitive industry, you’re going to invest more in your marketing budget. In SaaS, for example, some businesses spend up to 25% of their company’s revenue on marketing because it’s a highly competitive industry. Manufacturing, on the other hand, may only spend 7% because the competition isn’t as high or volatile.
- Growth stage: If you’re a newer business that’s still trying to scale up growth, you’ll spend more (closer to 20%) to get your business and brand established in the market. A more mature business that’s just aiming to maintain brand recognition and loyalty will spend closer to the 7–12%.
So, for example, if you’re an established manufacturing company that brings in $1,000,000 in revenue (for the sake of easy math), you’d spend $70,000 to $120,000 a year on marketing, coming out to about $5800 a month.
On the other hand, if you were an estalbished SaaS company making $1,000,000, you may spend upwards of $250,000 a year on marketing, or about $20,800 a month.
Can digital marketing work on a limited budget?
It depends upon what your definition of “limited” is. If your marketing budget is limited to $500 a month, you’ll definitely struggle to see results. But, if you definition of limited is 5–6% of your annual company revenue (instead of 7-12%), digital marketing can still work for your business — you just have to be strategic about how you allocate funds.
If you have a limited budget, the better option may be to focus on 1 or 2 channels (SEO and PPC, for example) that will do really well for your business, rather than trying to allocate less money to all the major channels (SEO, PPC, social, content marketing, email marketing) for the sake of coverage.
How do I allocate my budget for digital marketing?
Allocating your digital marketing budget depends upon your business, audience, industry, and other factors. Allocation will look different for companies across industries, and even within the same industry!
The rule you’ll often see is the 70-20-10 rule, which means you spend:
- 70% on channels with proven ROI (SEO, PPC, etc.)
- 20% on growth/emerging channels (Short form videos, influencer partnerships, etc.)
- 10% on experimental strategies (GEO, AEO, etc.)
Here’s how you can effectively allocate your digital marketing budget:
Make sure you have the basics set
Before you allocate your budget, make sure you have the basics set.
That means:
- Goals are established
- Audience is defined
- Any previous campaigns were audited and analyzed
Knowing all this infomation will help guide you when setting your marketing budget.
Determine your core strategies
To properly distribute your marketing budget, you must first identify your core strategies.
If you already have established marketing channels you manage, look at which ones are driving the best results for your business. Those will be the core strategies you’ll want to make sure you allocate for in your budget.
Starting with marketing from scratch? Do some research to see what strategies people have the most success with in your industry (Reddit can sometimes be a good place for honest opinions on this!). Typically, it’s going to be strategies like SEO, PPC, content marketing, and email.
Knowing your core strategies helps you know where a majority of your budget will go.
Allocate budget to core strategies first
Your core strategies are your tried-and-true tactics. They’re the ones that drive continual growth, so you want to ensure you’re budgeting enough to keep seeing success with those strategies.
That’s where the 70-20-10 rule comes into play — reserving most of your budget for core strategies that drive success ensures that your marketing will continue driving growth, even as you experiment with new and unknown strategies.
Keep in mind, too, that the “core strategies” may change as your marketing evolves.
A strategy you experimented with may become a core strategy if it drives success and growth for your business. If you think about it, social media was once an experimental strategy! Now, it tends to be a core part of marketing plans.
So, once you allocate budget for your core strategies, let’s talk about the experimental ones.
Determine experimental/exploratory strategies to invest in
A key component of a successful marketing strategies is exploring new strategies. Marketing keeps evolving and growing. A few years ago, AI search wasn’t even a thing — now it’s becoming a big area of focus.
Take time to explore what’s upcoming and trending. What are strategies your competitors are trying out? What are new strategies that people aren’t really experimenting with yet? Use part of your budget to try new strategies to try and expand your marketing.
Determine if you need any tools
When you’re setting your marketing budget, you need to account for whether you need to invest in tools. There are tons of tools on the market that are free, like Google Analytics 4 and Google Search Console. But you may need certain tools, that aren’t free, to help run your campaigns.
Some of those tools include:
- Email management platforms
- Social media scheduling tools
- Customer relationship management (CRM) platforms
- SEO tracking software
- Design programs
- and more
If you need any of these tools to help you run your campaigns, you’ll need to account for it in your budget.
Decide if you need outside help
Lastly, when you’re allocating your marketing budget, you need to decide if you’re hiring outside help to manage your strategy. Many businesses will opt to hire a professional agency or freelancer to manage their strategies — but, it comes at a cost.
You’ll want to determine if you’re going to hire an agency to manage some or all of your strategies, since you’ll need to factor it into your budget.
FAQ on digital marketing budgets
How much should small businesses spend on digital marketing?
Small businesses should spend anywhere from 5–10% of their annual revenue on marketing. Digital marketing is a great way for small businesses to scale their growth, so it’s important that you still invest in it, even if it’s only 5% of your annual revenue.
What is the minimum digital marketing spend for meaningful results?
There isn’t a direct answer to this question because there are too many factors that influence the outcome of “meaningful results.” Your industry, the competitiveness of your industry, how established you are, and other factors determine what the minimum amount is for impactful results.
For example, someone in a less competitive, niche industry may see fantastic results from a $2,000 monthly investment in PPC. For a business in a highly competitive industry, $2,000 may not do anything for them.
It also depends upon the strategies you invest in. Spending $2,000 on PPC looks a lot different than $2,000 on SEO, and can drive widly different results.
What does a $3,000 monthly digital marketing budget get me?
A $3,000 monthly digital marketing budget can be a good starting point for getting your digital marketign off the ground. You could use it to build your SEO strategy if you’re looking for long-term, steady growth or you could use it for PPC ads to get rapid leads.
A monthly budget of this size would be good if you want to start out by investing in one strategy and see how it goes for your business.
What results can I expect from a $1,000/month digital marketing budget?
A $1,000/month digital marketing budget won’t get you very far, especially if you’re diversifying amongst strategies. If you were investing in four marketing strategies, for example, you’d only have $250 each month towards them, which isn’t a lot.
Even if $1,000 was going towards one strategy, you’d still likely struggle to see really good results. Not to mention, the outcome will look different depending upon which strategy it is. $1,000 towards PPC will have a different outcome than $1,000 towards social or email marketing.
Results will vary depending upon how you allocate the budget and what strategies you’re using it towards, but generally, you’ll struggle to see meaningful results.
Start planning your digital marketing budget today
Having your digital marketing budget set and properly allocated is key to your marketing success. Start figuring out what you want to invest in today, so you can take action and start bettering your marketing tomorrow!
