A Strategic Guide to Marketing Budget Allocation | Key Steps

Marketing is an investment in your brand’s growth, lead generation, and revenue potential. You need a budget and a well-defined strategy to see real, effective results.

Whether you’re a startup or an established enterprise, maximizing every marketing dollar is essential for growth. This article explores best practices for marketing budget allocation, uncovering key challenges and opportunities to help companies optimize impact and Return on Investment (ROI).

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How to Allocate Marketing Budgets Across Channels

Today’s companies are presented with endless opportunities to promote their brand. When you think of successful advertising campaigns, you’ll likely consider everything from popular television commercials to iconic print ads, viral social media campaigns, and more.

If you’re running a smaller company, you likely won’t have the budget to run large-scale campaigns, with budget management skills. Fortunately, today’s digital tools and platforms give growing businesses cost-effective marketing campaigns, including some of the following:

Marketing Channel	Description
Traditional advertising	Ads placed in traditional print media like magazines, newspapers, and trade publications, as well as billboards, posters, and flyers, tend to reach larger audiences and cost more.
Direct mail	Sending mailers, flyers, and other media through the mail helps marketers target their communications toward a more specific audience. However, it also comes with costs.
Word of mouth	One of the older marketing strategies, and might also be the simplest. Satisfied customers spread the word with their friends, family, and other members of the community.
Email marketing	A cheaper alternative to direct mail, it lets marketers reach their audience through one of the most commonly used communication channels.
Digital marketing	Includes everything from digital publications to website advertising to ads placed in newsletters. Advertising through these channels can cost money, though usually not as much as more traditional media.
TV and radio	Includes commercials and other sponsored segments, usually presented in tandem with programming favored by your target audience.
Social media	Posts, videos, ads, and other campaigns geared toward reaching audiences on social media platforms like Facebook, Instagram, TikTok, and more. These might appear as traditional ads or take newer forms resembling word-of-mouth referrals.
SEO	Known as Search Engine Optimization, companies leverage their online presence by including specific keywords and phrases to boost their search engine rankings.
Influencer marketing	Public figures “influence” their pre-existing audience by introducing a specific product or brand more naturally, usually designed to mimic word-of-mouth referrals.

Today, both large and small companies rely on various channels to maximize their outreach. Most successful marketing campaigns have leveraged multiple channels to effectively and cost-consciously influence their target market.

Depending on the industry, region, and target audience, some methods will likely be more suitable for your brand than others. Finding the right balance is key.

Let’s explore how using data-driven strategies empowers you to balance your budget in the most sensible way.

How to set up a successful marketing budget: 4 key steps

Now that you’re familiar with some of the most common marketing efforts, here are four steps to building a marketing budget:

#1 - Set clear goals and objectives

First, ask yourself: What do you want to achieve with your marketing campaign?

It can be helpful to start by familiarizing yourself with your company’s overall business finance strategy. That way, your marketing initiatives will align with your company’s core goals and objectives.

These strategies will help you figure out who you want to reach. You’ll define your target audience, along with their key characteristics and demographic features. What do they want? What do they need? What are their hopes, aspirations, and values? Where are you most likely to find them?

You’ll want to draw up a list of key objectives from there. Regardless of the channel, every marketing campaign is designed with a specific aim. For example, you might want to convince a particular audience to purchase a product, book a demo, or build their awareness of your brand.

Based on these objectives, you’ll better understand what metrics to track when your campaign goes live. For example, if you’re interested in brand awareness, you might look at views, impressions, and clicks. If you have a more sales-focused objective, you can track the conversions and leads drawn from the campaign.

#2 - Audit your current marketing initiatives

Next, let’s take some time to evaluate your current marketing strategy.

Use a data-driven approach to understand where your marketing spend delivers the highest ROI.

Review past invoices and campaign performance. How much did you invest last year, and what were the results? Did you achieve your objectives or make measurable progress towards your goals? Identify what worked, where you fell short, and why, as this insight will help guide smarter budget decisions.

Based on your analysis, it may be time for a new approach. Consider revamping the creative on an outdated campaign, refining your messaging, or testing a new design to engage your audience.

If those strategies don’t yield the desired results, then it’s time to consider switching to a different marketing channel. The data might already indicate where your money is bringing in more value, or it might be time to try a new approach entirely.

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#3 - Determine the most effective channels

Where are you getting the biggest bang for your buck?

Based on historical data, you can adjust your spending based on where you’re getting the greatest return on your investment. For example, if you’re getting 10 conversions on a $100 ad spend, you might want to spend more on that campaign in the coming year.

If you don’t have any historical data, don’t worry. Based on your target audience, you can make certain inferences about which channels will work best. For example, if you’re selling a product aimed at individuals over 65, using YouTube and Facebook will be the most effective for this demographic; X (formerly Twitter) and TikTok have low usage for this age group.

Identify what medium your target group is most engaged in. Use data to see whether your assumptions are correct. For example, you might think you’re likely to generate leads from industry-specific publications or trade shows, but if you aren’t getting in front of the right audience, you won’t see the results. If that’s the case, adjust your spending accordingly.

#4 - Leverage data and analytics to optimize outreach

Marketers continually optimize their approach based on the latest data and information.

Even after you launch your campaigns, you’ll want to continually monitor their progress to optimize outcomes and strategize for future success. It can be helpful to keep track of key statistics and financial performance indicators related to your core objectives.

Depending on the medium, you can use statistics to adapt your campaign to real-time consumer preferences. For example, if a digital campaign isn’t performing well, you might be able to pull the ad and replace it with a different creative design to capture your audience’s attention more effectively.

What percentage of your budget should go to marketing?

The simple answer is that your marketing budget allocation will depend on your goals, objectives, industry standards, and other factors.

B2B companies spend on average 6.3% of revenue on marketing, while B2C companies are likely to spend between 11.8%. That’s because B2C companies usually need to invest in additional marketing channels to reach a broader consumer base.¹

A 2024 survey of chief marketing officers in North America and Northern and Western Europe supports this. This research concluded that an average of 7.7% of company revenue was allocated to marketing in 2024.²

However, it’s essential to remember that these statistics are based on more established companies. For startups and other high-growth companies, it’s not uncommon to set aside up to 30% of revenue to marketing to accelerate market penetration.³

How should your marketing budget be split?

The 70:20:10 rule is a simple way to think about how you prioritize your marketing spend. Rather than focusing on particular channels, it balances proven success with innovative strategies to help your company evolve without exposing you to too much risk. Here’s how it works:

• You spend 70% of your marketing budget on proven tactics. These are the campaigns and channels where you’ve already managed to reach your goals and objectives over a sustained period. For example, if LinkedIn ads continually bring in new leads, you’ll want to maintain your investment in that channel.
• You invest 20% in innovative strategies. Take advantage of historical data to strategize on where you can derive more meaningful returns. If advertising on a particular website has improved website traffic, consider expanding your reach into similar publications.
• You save 10% for experimental initiatives. This is where you get creative. Is there a new event you’re looking to host? A new channel you’re hoping to break into? Set aside some of your budget to try it out and see if it works.

If you don’t already have a business credit card for marketing-related spending and expenses, take a look to see whether it’s the right move for you.

Why Marketing Budget Allocation Matters

Ultimately, when it comes to marketing, it’s not always about spending more—it’s about spending smarter.

That’s especially true for startups and other high-growth companies. The way you distribute your marketing resources can make a huge difference in long-term growth and success. Implementing an effective marketing strategy ensures that every dollar spent contributes to achieving specific goals without compromising core business values.

By effectively managing marketing costs, you can increase engagement, improve brand perception, and boost cash flow into your business. Take the time to understand your audience and tailor your outreach to meet their unique wants and needs.

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Sources:

1. What is the average marketing budget for a small business? | BDC
2. Marketing budget as a percentage of companies' total revenues according to chief marketing officers (CMOs) in North America and Europe from 2014 to 2024 | Statista
3. Top Insights: Average Marketing Budget by Industry | Asymmetric