How to make a marketing budget - Marketing Budget Allocation

in Marketing by Kathleen Aoki
(2 Ratings)
how to make a marketing budget allocation

When it comes to marketing your business, the old adage "It takes money to make money" definitely applies. It's not enough to have a great product or service - you need to let people know about it by developing and executing a sound marketing strategy within a reasonable cost. Here are few things to consider which can answer the question - how to make a marketing budget ?

How much should you spend on marketing?

As a small business owner, you may be wondering how much you should be allocating for your marketing activities. According to the US Small Business Administration, a marketing budget allocation should equal between 2 per cent and 10 per cent of sales.1 While these figures represent a rough guideline for spending, a marketing budget should ultimately be driven by a company's strategic goals.

For example, some things to consider in helping you to determine the most appropriate budget are:

  • How established is your business? In general, the less established you are, the more you will have to spend. Some experts recommend that businesses starting out should spend up to 15 per cent  of sales.2

  • What are your company's goals in the coming year? Write them all down and organise them from most important to least important.

  • Who is your target audience and what are the most effective channels to reach them? For example - traditional advertising, PR, social media, QR codes, email campaigns or a combination of different strategies?

  • What are you currently spending on marketing activities and how effective has it been? Is it time to spend more or less and/or consider different strategies?

  • Does your business have a lot of competition?

  • And last - but certainly not least - how much can you realistically afford?

Once you have a clear perspective on your company's goals, you can consider different options for setting your budget.

As a percentage of sales

This method provides a simple and straightforward approach to setting a budget. The downside is that it assumes a direct relationship between sales and marketing, which is not always the case.


You can use previous years' marketing budgets as a guide for the current year. Historically speaking, if the amount of spending has produced the desired results, it's probably a good indication that the budget is in line with the company's goals. If not, it may be time to adjust up or down.

Goal oriented

As you might have guessed, this budget is based on what you want to achieve in the year ahead, e.g. you want to rebrand, launch a massive social media campaign, drive the competition into the dust and are willing to spend whatever it takes to get the job done.

A combination of methods

Many companies rely on a combination of methods as setting a budget is not always a straightforward task. Most businesses have to take into account various factors and competing interests within the organisation, as well as the nature of the industry, the competition and specific goals. This method recognises that there is not a one-size-fits-all approach.

Generally speaking, the more effective you want your marketing campaign to be, the more you have to spend. However, this is not always the case. Social media has proven itself to be a great medium for producing a lot of bang for your buck. Creative giveaways, contests and other tactics by savvy marketers have produced some amazing results - sometimes for just the cost of a few products.

As you create your budget, be sure to take into account unexpected expenses that are certain to arise and build these into your budget. Finally, always measure your spending against your marketing objectives to give you a realistic sense of how effective your campaigns are, so you can adjust your budget accordingly in the future.




This article represents the views of the author only and not those of American Express.

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Kathleen Aoki

Kathleen has a degree in marketing with over 10 years experience in the IT field as a database developer and web designer. As a freelance writer, Kathleen has written for several publications across Australia as well as for various business and hi-tech blogs online.

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