How to Set a Digital Marketing Budget

In marketing, you have to “pay to play.” Businesses are taking this seriously, with marketing spending projected to hit nearly 13% of revenue by 2025.

That might sound high, but the real question is: What’s right for you? Figuring out where to start can feel overwhelming.

At Zoe Marketing & Communications, we hear this all the time. Clients ask, “How much do I need to invest to keep growing?”

This blog explains the purpose of a marketing budget, how goals shape spending and key factors like competition and customer value.

5 important factors for setting a digital marketing budget

1. Why a marketing budget matters

Think of marketing as a steady drip, not a faucet you turn on and off. It’s an ongoing effort that requires consistency.

Your marketing budget keeps you financially on track, but it’s more than that — it’s an investment in your growth. It helps determine:

• When to spend (monthly, quarterly, annually)
• Where to invest (ads, email, social media, SEO)
• Why those investments matter

2. Setting business and audience goals

A marketing budget starts with knowing what you want to achieve and who you need to reach.

Business goals

Marketing isn’t just about sales. It also builds:

• Brand awareness
• Lead generation
• Customer retention

Audience goals

Who are your ideal customers? Understanding their behaviors ensures you spend wisely. Ask yourself:

• Who makes purchasing decisions?
• What are their key interests?
• Where do they live?
• How likely are they to buy?

Market research, trends and surveys can help answer these questions.

3. How much should you spend?

There’s no one-size-fits-all budget, but here are general guidelines:

• Small businesses: 7-8% of revenue
• Mid-sized companies: 10-12% of revenue
• Overall average: 8%, per Gartner’s 2024 CMO Spend Survey

These numbers vary by industry. High-competition sectors often require bigger budgets.

If you’re new to marketing, start small and build over time. The key is shifting your mindset to see marketing as an essential, ongoing investment.

4. Assessing your competition

Knowing what you’re up against helps set realistic spending expectations.

A quick exercise: Open an incognito browser and search for what you offer — e.g., “braces for my kids in Chicago.” Look at who shows up in:

• Google Business Profile (local listings)
• Paid ads (top search results)
• Organic search results (SEO rankings)

Businesses appearing in paid ads are investing in SEM. Those dominating organic results have a strong SEO strategy. Both take time and budget.

(Pro tip: Search in the morning before ad budgets for the day run out.)

5. Understanding customer lifetime value (CLV)

Once you start marketing, you’ll begin to see how much it costs to acquire a customer. This is called customer lifetime value (CLV).

CLV helps answer:

• How much does one customer spend?
• How much does it cost to gain a customer?
• How many customers do I need to meet my revenue goals?

To calculate CLV, track these over 6-12 months:

1. Revenue ÷ total sales = average purchase value (APV)
2. Total sales ÷ total customers = average purchase frequency rate (APFR)
3. APV × APFR = customer value (CV)
4. CV ÷ Total customers = average customer lifespan (ACLS)
5. CV × ACLS = customer lifetime value (CLV)

Knowing your CLV helps you budget smarter, aligning marketing costs with revenue potential.

Next steps for setting your marketing budget

Creating a realistic marketing budget takes time, but now you have the framework.

Need expert guidance? Talk to us. Zoe Marketing & Communications can help optimize your budget for maximum impact.

Still getting your budget bearings? Check out these resources:

• How to set digital marketing goals
• Typical digital marketing costs with Zoe