How much should you invest in marketing?

The logical answer to the title question would be that any business should invest in marketing as much as it helps it achieve its goals. But is it really that simple?

As we explained in the first blog post , there are many reasons why any business that wants to grow should invest in marketing. Therefore, we will try to stay as focused as possible in this article and analyze how much should be invested in marketing, without going into "Why?", especially since we have established from the beginning that there are many reasons to invest in this type of activity in such a saturated market.

The budget allocated to marketing must be in line with the marketing strategy and all actions in the marketing plan. In other words, it is good to take the two into account at the same time. You don't just set a budget and then struggle to do as many marketing activities as possible, just to feel like you're doing a lot, and you don't set a lot of actions without having an idea of what budget you need for them.

Before asking yourself “How much should I invest in marketing?”, maybe it would more efficient to answer the following questions:

How much do you afford? And how much is too much in your case?

Depending on the size of the business, its age on the market and its long/short term growth or maintenance goals, most sources state that businesses should invest somewhere between 2%-15% of revenue in marketing. Businesses that are smaller and want to keep their place in the market should reinvest in marketing between 2%-5% of revenue, while businesses that are larger or that want to grow in the market should invest somewhere between 5%-10% of their income. Sometimes, for larger or older companies on the market, 15% can be too low for everything they choose to include in their marketing strategy. Definitely, this category also includes the market-leading companies.

Also, B2B companies spend less percentage of their income, on marketing than B2C companies, because compared to the first ones, B2C companies need to have strategies that involve more than one way to reach their target audience. At least, this is what webstrategiesinc.com shows in their analysis.

What brings you the most important results?

Make sure you've done an analysis of the actions you want to include in your marketing plan. Why did you choose the ones you chose? Where is your target audience and how do you reach them? Do the strategies you choose help you reach your customers? If so, great! If not, you might want to review your strategy. What do you want to achieve and how will you achieve those things? Then, depending on your budget, prioritize those actions that bring you closer to your goals. Most marketers want to do as much as possible to make the project as large and impressive as possible, but often budgets show that not everything can be done qualitatively. So, stick to those actions that fit into your budget, from which you get a positive ROI, that bring you closer to your long-term or short-term goals, whether it's growing your business or a product launch campaign, for example.

What about that ROI (return on investment)?

According to businesscollective.com , ROI is a marketing measurement tool that shows you how much profit you get from certain marketing activities. In order to understand the return on your investment, you have to keep in mind a few aspects: the cost of goods sold (COGS) - the actual cost to produce your product (or provide your service), the marketing investment - media cost and the total revenue or your gross/net profit.?

Basically, ROI involves understanding the customer lifetime value (CLV) - how valuable a customer is to your company, not just on a purchase-by-purchase basis but across the whole relationship; the target acquisition cost per customer cost - meaning the total cost of your marketing budget and divided by the number of customers you won with this investment. Also, dividing your target revenue by the average customer revenue, then multiplying this number by the target acquisition price and once you have your ROI goal and overall annual revenue goal, calculating your targeted marketing spend - is the reverse way to see the amount you should invest in the marketing budget.

Your own team or an external one?

Sometimes, especially when the business is large and complex, it helps a lot to have an internal marketing department because the team will constantly store information about other departments and this will decrease the probability of losing certain information that may be important to know by marketers.

However, it takes time and it is quite complex to form a marketing team, in which each person has expertise and experience in what you need. This is where it can be extremely useful to collaborate with an agency or an external marketing team, ready formed and who has worked on a lot of projects similar to the one you want to develop in your company. The members of these teams know each other, they have worked together before and they know how to coordinate themselves and what steps to follow in order to give you a direction. All you have to do is provide them with as much information as possible, so they can understand your business and its objectives.

Of course, over time, you will find out if it is more profitable to work in the short term with external teams or, in the long run, with an internal team. Depending on what a business can afford, the geographical location and the size of the target audience, both options should be considered.

Another important point, that it is worth balancing the option of working with an internal or external team. If you don't have a team already, it's much more efficient, in terms of time, costs and energy invested, to work with certain marketing teams, on certain projects, if not constantly or for longer periods of time. As for the time invested in the actual marketing actions, I think they vary depending on the period, the action to be implemented, the objectives and the time left to achieve them.?

We hope the above questions will help you get an idea of how much you should invest in marketing and what parameters you need to consider when preparing your budget for marketing activities.