Drawing up a marketing budget: how to get started

Asking someone after the size of their marketing budget is just as impertinent as asking them how much they earn.

Here are some comparisons:

• Many see this as a well-kept secret that they prefer not to discuss with others.
• Not everyone knows precisely how big their budget is, and how big it should be, could be or is allowed to be.
• It is never enough.
• And your boss probably thinks it is too much.

Enough is enough. Let's see what a few surveys can tell us, in which we are permitted to take a peek in the CMO's wallet.

The magic 10%

The CMO Survey has been asking hundreds of marketing managers in the US about their marketing approach and budget twice a year since 2008. Of course, one of the questions has to do with the proportion of the total budget that is allocated to marketing. And what can we conclude from the results up until 2017? Expressed in percentages, this has been fluctuating around 10% for years, in both the B2B and the B2C world.

Compared to the turnover, the marketing budget amounts to approximately 8%. In product marketing for consumers this nevertheless amounts to 12%. 

A survey conducted by Gartner and one by The American Marketing Association and Duke University revealed that 10% is what is commonly allocated.

Is it 10% in your case too? And who determined the 10%? The CEO/CFO or the CMO?

Growth companies

Marketing has to serve as a lever for further growth. SaaS companies who want to grow quickly in order to capture a large market share invest heavily in sales and marketing. The line between sales and marketing is often quite fuzzy in companies like this, which offer their software as a service and are aiming for international expansion. The conventional 10% does not allow them to grow fast enough. Salesforce invests 47% of its budget in sales and marketing, for example. Marketo even invests as much as 66%.

Let's take a look at another big player: Google. Almost 15% of this company's total costs are spent on sales and marketing. In comparison to the turnover this is 11%.

Touch-and-go

The marketing budget is often expressed as a percentage of the anticipated returns. If the company wants to grow, marketing is the best tool to achieve this ambition. 

Or akternatively, it is argued that better results can or must be achieved in marketing with the same budget.

Or the marketing manager has less freedom in deciding how to spend the marketing budget and has to ask approval for the necessary funding for each project individually, without knowing what the limit for that financial year is. That means having to blindly rely on there being enough money for what you want to do.

To what extent does the ROI of marketing activities contribute to justifying the marketing budget (or an increase in this)? No easy task, of course, because marketing does not always have a measurable impact in the short term.

How is this at your company? Are you allocated a specific budget? Do you have to fight for a budget increase? To what extent can you prove the ROI of your marketing budget?