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Your Guide to the Ins and Outs of a Marketing Budget
July 28, 2022

Your Guide to the Ins and Outs of a Marketing Budget

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As Benjamin Franklin said, "Beware of little expenses. A small leak will sink a great ship."

Enterprises must have a firm grasp on their expenses, even the little ones, to better plan, reach business goals, and anticipate operational changes — all of which can be achieved through a balanced budget. As a marketer, you know how complex an omnichannel strategy can be, especially when allocating funds. In order to continue to be able to allocate funds toward different channels, you have to know what you're spending on them and what you're getting in return, i.e., your ROI.

To ensure ongoing success and growth, you must create a comprehensive marketing budget. The goal is to organize where your funds will go and realize how you can cut marketing costs to save money while enhancing productivity.

The state of marketing in 2022

Marketing budgets are being put under a microscope because of the current state of the world. Times are changing, and marketers are under more stress than ever before.

In a recent survey, 59% of marketing leaders are experiencing increased pressure from CEOs regarding budget. Most say that the greatest challenge is proving the impact of marketing spend. Non-marketing leaders are hyperfocused on the short-term effects of marketing spending, often ignoring the long-run effects.

If you're under pressure to produce a higher ROI, a marketing budget will provide the blueprint you seek, helping you more easily showcase where funds are going and why. With the help of other tools, you can show how well your initiatives are converting. For example, direct mail offers an average conversion rate of 40%, which is tough to ignore. The dollars invested in such channels and campaigns are worth it — both in the short and long run.

Although a recent survey shows that three in four CMOs report increased budgets in 2022 compared to 2021 (9.5% of the company's overall revenue vs. 6.4%), their budgets are still below pre-pandemic spending levels. For example, in 2018, the average budget was 11.2% of total company revenue.

Budget allocation is also shifting post-pandemic. As Europe and North America continue to relax pandemic restrictions and protocols, companies are transitioning back to a more hybrid marketing approach. When surveying the same 405 CMOs mentioned above, they said 56% of their marketing budget would be allocated to digital channels in 2022, and nearly half the total available budget (44%) will be spent on offline channels — a much more equitable split in comparison to recent years.

What are the key elements of a marketing budget?

When creating your market budget, include the best aspects for your enterprise. And remember, it's not set in stone. Your budget will change as the company grows, objectives change, and new trends emerge.

Key elements to account for when creating your marketing budget:

  • Your marketing goals
  • Your buyer personas and the customer journey
  • Your marketing channels
  • Analytics or the ability to measure the performance of each channel
  • Benchmarks of past channel performance

Budgets can be allocated several ways, but the simplest is by channel. Is your goal to drive more traffic to your site? Do you want to promote a new product? Perhaps you want to generate more followers? Once defined, allocate your budget to the channels and respective ROIs that will help you achieve this. For example, 67% of marketers say direct mail delivers the best ROI of any channel, so it's most likely allocated a heavy spend vs. others.

In reviewing your current spend, the more detailed your budget is, the easier it will be to cut costs and identify high-cost, low-performing channels. For example, are you currently outsourcing your social media marketing campaigns to an agency charging you significantly more than what it would cost in-house? If so, why? Can you achieve similar results? Could that money be used more effectively somewhere else?

Marketing budget breakdown — allocation by channel

If you're unsure how to get started, the 70-20-10 rule is an ideal benchmark. Plan for 70% of your budget to go toward strategies you know work, 20% toward new strategies with the intention to grow, and 10% toward experimental strategies. For example, if your marketing budget is $10,000, you may allocate $7,000 to social media software that helps drive your strategy and successful paid search campaigns; $2,000 to offline advertising strategies you want to test; and $1,000 toward event marketing.

Below are some of the most commonly explored channels, but there is no one-size-fits-all breakdown. The best channels for you will be the ones that work best for your company and overall marketing strategy.

Paid media marketing

If you have run Google Ads in the past, you're familiar with the PPC model. Social media platforms offer similar programs but also charge based on impressions. The cost per click will vary depending on your chosen platforms but ranges from cents to a few dollars and you'll set your monthly budget based on the ROI. Push your budget limits until you see ROI plateau or drop, then you'll know your optimized monthly spend. If you choose to outsource your social media strategy, you could pay an additional $2,000 to $20,000 monthly in agency fees.

Email marketing

Email marketing is highly effective, especially for online retailers. Customer acquisition rates can be up to 40 times higher than Facebook and Twitter combined. Since those subscribing to your email list are already interested in your business, this lower-funnel channel can yield a fairly high return. The cost of this channel is usually lower - if your in-house team is managing strategy, design, and execution - and segmenting and testing are key to a strong ROI. Budget factors include your internal resources, the size of your list, and how many emails you send per month.


A well-planned SEO strategy can help improve your ranking on Google, driving more traffic to your site - once configured correctly. Many companies outsource an initial SEO site audit and strategy - which can run several thousand dollars - to optimize pages and create a high volume of content. After that, a monthly maintenance plan for content tune-ups and updates runs around $500.

Direct mail

If you're interested in offline marketing, direct mail provides many opportunities, particularly when partnering with a leading direct mail automation platform. Data shows that direct mail accounts for the largest portion of U.S. local advertising spend, coming in at around $38.5 billion. Although the initial investment may be daunting, especially if you have not launched a direct mail campaign in the past, the potential ROI is massive, with open rates reaching 90%.

If you have yet to try direct mail marketing, this channel may fall under new strategies, pulling from that 20% of your budget allocated for such strategies. Once you see how successful automated campaigns are, direct mail may transition into the 70% of your budget that you know works.

It's important to note that while channel identification and allocation are important, your marketing efforts should link back up in an omnichannel approach. For example, there's no denying the value of email marketing. Still, it is just one piece of the puzzle and is not always the most effective — mainly while focusing on response rates. Direct mail has a 13 times higher response rate than email, with 64% of marketers saying direct mail offers the highest response rate. Creating a multi-touchpoint campaign will yield even stronger results.

Related: Direct Mail vs. Email Marketing: The Battle of the Boxes

How do you calculate a marketing budget?

Depending on your strategy and marketing plan, you may set a new marketing budget quarterly or annually. You may also need to revisit your budget if your company changes or your goals shift.

When creating your budget, your decisions should be based on tangible goals. For example, increase sales through a strategic sales funnel, target new customers, or build brand awareness. Then determine what the success metrics for each will be. Whether it's lead generation, conversion rates, or website traffic, these metrics will help you track your strategy's effectiveness and whether your budget plan should change or move around funds to better-performing channels.

Take action: Let us do the calculations for you when it comes to direct mail marketing with our direct mail ROI calculator!

Save money with low-code and no-code MarTech solutions, like Lob

One way to reduce spending is by prioritizing greater marketing automation and low-code solutions. For example, you can implement drag-and-drop workflows. You can cut costs by increasing productivity, efficiency, and time savings while achieving greater returns. Lob is a leading partner in intelligent direct mail, offering scalable, connected, personalized, measurable solutions.

Level up your marketing by understanding what consumers want. Watch the 2022 State of Direct Mail Consumer Insights webinar to get actionable consumer data to drive intelligent direct mail and create better marketing campaigns.

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