When it comes to marketing, there is no one-size-fits-all approach. Every business is different and requires a unique strategy to reach its goals. However, there is a general rule of thumb that can help you determine the right marketing fee for your business. According to research, B2B companies should spend between 2 and 5% of their revenue on marketing, while B2C companies should allocate between 5 and 10%.At first glance, 5% may not seem like a lot.
But when you consider that this percentage should cover most of your regular marketing activities, it's actually quite reasonable. Of course, there are times when you may need to exceed this amount in order to invest in the foundation of all your daily marketing activities. For example, if you need to update your website every three or five years, you'll likely have to exceed your 5% budget. Without a solid marketing foundation, your daily marketing activities will be ineffective and a waste of money. To illustrate this point, let's look at an example.
We often talk to catering companies and entrepreneurs who have websites that generate less than 5000 visitors a month. While this is a respectable amount of traffic for many small businesses, if the website has a conversion rate of 1 in 10,000 visitors, it would only result in one new customer every two months. Now imagine if the website was updated and optimized for a conversion rate of 1 in 500 visitors. This would mean spending 95% less to acquire each new customer. While it's not always this simple, this example demonstrates why it's almost always beneficial to exceed 5% of the marketing budget allocated to infrastructure investments. The first step toward allocating the marketing budget is to determine your marketing objectives for the year.
We recommend setting at least three objectives with predefined measures of success linked to each one. Once you have established these objectives and measures of success, you can begin allocating your marketing budget. Remember that both traffic and conversions are necessary to boost your growth. With established objectives and a solid marketing foundation (including a strategy), you can select the best marketing activities for your business. Generally speaking, businesses should try to spend between 2 and 5% of their sales revenue on marketing. This 5% rule has been based on years of previous experience and feedback from successful companies.
While it may not seem generous at first glance, it's actually quite reasonable when broken down. This percentage should cover most of your regular marketing activities. Of course, there are times when you may need to exceed this amount in order to invest in the foundation of all your daily marketing activities. For example, if you need to update your website every three or five years, you'll likely have to exceed your 5% budget. New businesses can even spend up to 50% of their sales on introductory marketing programs during the first year. Establish a detailed marketing budget before the start of each fiscal year and make any changes you want in parallel with the company's growth or decline.
Identify your most profitable marketing channels and then dedicate more of your budget to those channels that work best for you. Your marketing budget should cover all the costs necessary to market your product or service, including print advertising, promotions, demonstrations, exhibitions, public relations, social media, free product samples or gifts, and Google AdWords costs. While B2C product sectors dedicate an average of 15.1% of revenues to their marketing budgets, B2B product sectors report 7.8%. However, while most companies spend around 5% of their total revenue on daily marketing activities to maintain their position in the market, they will increase that amount up to 10% when they intend to grow and establish a larger market share in their niche. Partnering with a marketing agency also gives you access to a team of specialists who can help you achieve your goals faster and not waste your marketing budget. A typical marketing budget usually lasts between 12 and 24 months and provides details about the channels that will be used and the corresponding costs.
