How to Set a Marketing Budget for Digital Campaigns

In marketing, the adage is you have to "pay to play." And businesses are taking this more seriously than ever. In fact, marketing spending is slated to hit nearly 13% of overall revenue in 2025.

Depending on your business and goals, that feel unrealistic. It's really about what's right for you. Still, knowing where to start can feel overwhelming.

This worry is normal. At Zoe Marketing & Communications, many of our clients grapple with setting a marketing budget. There's that looming question. "How much of my profit do I have to put back into marketing to keep growing?"

We're here help. In this blog, you'll discover:

1. The point of a marketing budget

2. The importance of setting business and audience goals

3. By-the-numbers guidelines for spending

4. The value of looking at your competition

5. The basics on figuring out what a customer is "worth"

1. The point of a marketing budget

Think of marketing as a steady drip, vs. a faucet you turn off and on. In other words, marketing is a long-term play. 

That means a marketing budget does more than keep you on track financially. It's an investment in your growth.

Your marketing budget will help you know when to make those spends (monthly? quarterly? yearly?), where to make them (targeted digital ads? email marketing? social media?) and — as we'll see in the next section — why to make them.

2. The importance of setting goals

A marketing budget begins with understanding your business goals, or how you want to grow — and your audience goals, or who you're trying to reach.

Business goals

Of course, the ultimate goal is the bottom line. But business goals also run deeper than profits. For example, consider:

• Building your "branding" or visibility

• Reaching high-quality prospects or leads who are more likely to convert

• Engaging with (and retaining!) your current clients

Audience goals

Who is your target audience? They're the people you're delivering your marketing messages to. And knowing them is essential to spending your marketing money wisely (and not wasting it). It's helpful to know:

• Are they the household decision-maker?
• What are their interests?
• Where do they live?
• What is their "buying intent" — in other words, how likely are they to purchase what you're selling?

Lean into market research and trends to start. Then, dig in deeper. Talk to or survey your current customers, and create "buyer personas."

3. By-the-numbers guidelines for spending

Broad strokes, there are percentage ranges for marketing budgets. According to the Small Business Association:

• Small businesses should spend 7-8% of their revenue on marketing

• Mid-sized companies should spend 10-12% of their revenue on marketing

As of 2024, that average is around 8%, according to the annual Gartner 2024 CMO Spend Survey

Remember, these are guidelines. Those rates might be higher depending on your goal and your industry (i.e., if there's more competition — more on that below).

Also, they're something to strive towards progressively. It's a mindset. And, if you haven't invested much in marketing before, it's a mindset shift.

4. The value of looking at your competition

It helps to know what you're up against. The higher your competition, the more you'll need to spend to compete and reach that audience.

To start, open up an "incognito" browser and search for what you offer — "braces for my kids," for instance. On that first page of Google, look at who shows up in the:

• Google Business Profile section

• Paid ads

• Organic search results

These factors — especially the first two — give a sense of which competitors are likely outspending you.

(Pro tips: Search in the morning, before they've spent their advertising budget for the day. Also, use an incognito browser to avoid your own search history clouding your results.)

5. The basics on figuring out what a customer is "worth"

Once you've marketed for a while, you'll start seeing how much it costs to gain a customer. This metric is customer lifetime value, or CLV. It helps you answer a few key questions:

• How much does one customer spend?
• How much does it cost to get one customer?
• How many new customers do I want?

Once you know how much it costs to get a new customer, you can see how many marketing dollars it'll take to hit your revenue goals.

Determining your CLV takes a few layers of math, but in a nutshell, you'll need to know three key things over a period of six months to a year:

1. Your total revenue

2. Your total number of sales

3. Your total number of customers

From there, it's just a matter of math:

1. Divide revenue by number of sales for your average purchase value (AVP)

2. Divide number of sales by customers for your average purchase frequency rate (APFR)

3. Multiply your APV and APFR to get your customer value (CV)
4. Divide your CV by number of customers for average customer lifespan (ACLS)

5. Finally, multiply your CV by ALCS for your customer lifetime value.

Next steps to setting a marketing budget

Quite a bit goes into creating a realistic marketing budget. But you now have a better flavor of what it takes. So what's next?

Start with determining your business goals. That's where it all begins. Then, explore short-term vs. long-term marketing. You'll likely want to account for both in your budget.

Or, looking for some extra support? Talk to us. Here at Zoe Marketing & Communications, we're ready to help you find direction and optimize your marketing budget.