Are you having trouble picturing what marketing budget size is appropriate for your company? This article provides examples of how different business types and industries allocate their budgets.
In the last article of our SME series, “How to Build a Marketing Budget in 2022” you learned about building marketing budget and allocation. Now it’s time to get some context by getting ballpark figures for what you should spend on your business.
Marketing Budget: A Relative Number
In an ideal world, you would have an endless budget that allows you to execute any marketing vision. However, in the real world marketers are limited by budget. Every decision made to go down one path means that you have to forgo others. Fortunately, even marketers on a small budget can punch above their weight and compete with industry leaders with deeper pockets. The trick is picking marketing strategies that have a low cost and the potential to generate big returns. Enter experiential and guerilla marketing – proven strategies for being successful with smaller marketing budgets.
Experiential marketing – What’s it all about?
Experiential marketing emphasizes the customer journey by engaging them on a personalized level. This marketing type gives the feeling that messages are speaking to them directly. 84% of customers say they want to be treated like a real person and not just a number. Personalized marketing achieves this while also increasing clickthrough rates and sales numbers.
Furthermore, experiential marketing increases the connection between the product and emotion. Amplifying feelings that can trigger a purchase doesn’t cost extra to implement. It’s about getting into the head of the target audience and reinforcing the reason why they need to buy.
Social shareability is another important aspect of experiential marketing. Creating content that people naturally want to share with their social circles is lucrative. It means that your customers will market products on your behalf. This is a strong endorsement of your brand and saves marketing dollars.
Guerrilla marketing overview
Guerilla marketing uses unconventional strategies and out-of-the-box thinking. Viral social media messaging and personal interactions are the backbones of guerrilla marketing. The advancement of smartphone technology and social media functionality means guerrilla marketers have many opportunities.
Low and no cost is another characteristic of this marketing form. In fact, guerrilla marketers spend 90% less on advertising, so it’s perfect for those on a tight budget and are willing to put in the work. Well-funded marketing teams may overlook these strategies since they have more options.
Marketing Budgets by Industry: Stats You Want to Know
Let’s take a look at how different industries allocate marketing budgets. Keep in mind that you should pay attention to the percentage of income that is reinvested into marketing. This number can be compared to your own marketing strategies. Whereas, comparing the actual marketing spend of companies may not be practical since they go into the billions of dollars.
SaaS (software as a service): the percentage of revenue that a business can reinvest into marketing depends on the business model and overheads. SaaS businesses have better margins because they provide software, which is scalable in a way that selling physical products isn’t. Therefore, companies like Salesforce can reinvest up to 46% of its revenue back into sales and marketing.
Education sector: world-renowned universities like Cambridge, Harvard, and Oxford have a rich history and their reputation stems from word of mouth. However, universities also spend a lot of money on marketing to seek out talented students. The marketing strategies include social networks, public events and information campaigns. For example, Stayer Education in 2017 invested 18.2% of their revenue into marketing.
Manufacturing industry: a big portion of sales that manufacturing companies generate are derived from sales. That’s because many alternatives exist so production businesses need a way of standing out from the crowd. Consider Johnson & Johnson, one of the world’s most famous medicine manufacturing companies. They spent up to 27.7% of their revenue on marketing efforts in 2017, resulting in a growth of 6.7%.
Marketing companies: you might think that marketing agencies don’t spend much on advertising. After all, they are staffed by in-house specialists that can do their own marketing. However, WebFX, one of the top marketing agencies, spends up to 45% of its revenue on advertising. The huge marketing spend is a big reason for attracting top-tier clients like National Geographic, Hooter, Aston Martin, Wrangler, Verizon and FujiFilm.
Technology: Compared to the previously mentioned industries, the top technology companies spend a lower portion of their revenue on marketing. Here is a breakdown of the percentages:
- Oracle – 22%
- Intel – 11.9%
- Google – 11.9%
- Microsoft – 15%
Keep in mind that these companies have revenue that goes into the billions of dollars. Therefore, these percentages represent a mind-boggling large marketing budget. Aggressive strategies are used for hyper-competitive product ranges. This includes the smartphone industry, which is lucrative.
Marketing Budget Examples in Big Households
Marketing budgets are also determined by the target market. For example, B2B advertising spend may differ from big household audiences. The latter has less spending power for the average item. Here is an idea of how much companies spend on markets that target big households:
Airbnb marketing budget: before the pandemic, Airbnb’s main advertising strategies included affiliate marketing and paid search. However, the budget was cut in half during the pandemic from $1.14 billion to $482 million. They found that reducing advertising by a significant amount did not decrease traffic. That might be because Airbnb is one of the industry leaders in the accommodation sector.
Tesla marketing budget: Tesla is famous for being the first automobile company to push the electric vehicle industry forward. However, did you know that Tesla actually spends $0 on marketing? You might be wondering how it manages to generate so many sales. Well, the company leader, Elon Musk, is one of the richest and most popular business leaders in the world. In fact, his tweets can cause stocks to rise or crash because he has so much attention. Therefore, Elons social media presence is more than enough to market new products and services.
Coca Cola: the Coca Cola annual marketing budget was on average $4 billion in the period 2015-2020. It is arguably the most popular beverage on the planet, yet billions are spent on marketing – why? Being top-of-mind in the beverage market is important. That’s because alternatives are released each year that compete against Coca Cola sales. Advertising is required to maintain a steady market share.
Movie marketing budget: most movies have a spate budget for marketing and production. That is because both are required for success. The movie could have the best actors and story in a decade, but nobody will turn up at the cinema if audiences did not know of their existence. However, production costs take up the majority of the costs for big blockbuster releases – after all, high-profile actors demand payment to match their talents. For instance, the Dune marketing budget is likely to be smaller than their production budget, which was $165 million.
Marketing Budget Examples in Startups and Small Businesses
Startups and small businesses usually do not have the luxury of big marketing budgets. They need to make the best of what they have to work with. You would be surprised by how far creativity and hard work stretch a small budget beyond all expectations. Below are a few examples that might inspire you to push your marketing boundaries too.
Indie games: what can you do if you’re developing small indie games on a 0 budget? The gaming industry can be rewarding for indie developers that release a game that’s genuinely good. Streamers and YouTube content creators will take notice and provide favorable reviews. This in turn generates a lot of interest from gamers. Consequently, the game will rise in the Steam charts and even more gamers will take notice.
Marketing budget for a startup: A Gartner study shared that the average marketing budget for a startup is 11% of its revenue. This figure reflects the nature of the startup phase – money is required for various aspects of growth such as hiring employees, product research and buying company assets.
Marketing budget for small businesses: experts recommend that small businesses should spend around 7-8% of their revenue on marketing. This figure strikes a nice balance between growth and reinvesting funds into other areas of the business. However, this is a rule of thumb that should only be used as a reference. Investigate the needs of your individual business to figure out the ideal advertising budget.
By now you should have a rough idea of how much money different companies spend on advertising and what percentage of the revenue it represents. Paying attention to marketing budget examples helps you calculate a range of what competitors might be spending. Therefore, you can predict what funds are needed to compete.
We understand that building a marketing budget can be overwhelming if it’s your first try. To help you along, consider our next article of this SME series, “Most Common Advertising & Marketing Budget Mistakes to Avoid”. You’ll learn about the mistakes other business owners have made so you don’t have to.