You’re looking forward to a successful 2020. The Year of the Rat. You know marketing is a key component to the success of your business, but you’re not sure how much you need to budget for 2020. It’s a conundrum. You don’t want to spend too much time figuring out what other people are doing. Even though we’d love to have a single, simple answer and a one-size-fits-all answer, the reality is that marketing budgets depend upon industry and revenue.
Whether you’re in the B2C or B2B space, you can’t sell your product or service unless people know about you. It’s easy to assume that one piece of marketing content can meet all the needs of every audience. That’s simply not the case. Sure, people may remember the last ad or image that converted them from “Eh, maybe” to “Yes, me!” But most people won’t specifically remember the marketing efforts that brought them from awareness to consideration to purchase. You have to invest in your marketing plan in order to drive results.
Never fear! We’ve dug into the research to give you some of the most reliable industry buzz so you can make a more informed decision in 2020. We’re also going to point out emerging social media platforms, so you can see if marketing on those mediums might work for your company. There is nothing like getting in on the ground floor. Who knows? Maybe you’ll end up establishing yourself as an authority on the next Facebook before Facebook goes the way of Myspace.
Why You Need to Care About Your Marketing Budget And Where To Put Your Money in 2020
We all know that marketing isn’t cheap, especially since our competition is all across the world compared to just 25+ years ago. Because of this huge change in the marketing landscape, understanding how to get the most from your marketing dollars is more important than ever. One of the world’s wealthiest men, Bill Gates, said if he was down to his last dollar, he’d spend it on marketing. Which makes a ton of sense, because your customers can now buy anything from anywhere, at any time. All this does is force you to work harder and longer to get noticed and keep their attention.
Thankfully, there is a path to success even in today’s highly competitive marketing world. The best place to start is your annual marketing budget; here are three of the best ways to approach your marketing budget for 2020: as a percentage of your overall budget, revenue, or average cost per lead.
Making Changes To Budget Based On A Percentage of Your Overall Budget
It’s no surprise that as more channels to reach customers open up, there are more places to spend your budget. In fact, most industries expect to increase their marketing budgets in the coming year. Across B2C and B2B, the average marketing budget is 11.1 percent of a firm’s total budget. Now, if you’re looking to expand or grow even more year over year, you’ll probably need to increase that number to meet your new goals. Don’t be shy about your vision for your company. You must be fearless when it comes to making your dreams into a business reality.
However, we must remind you that the 11.1 percent figure is an average of four sectors – B2C product, B2C service, B2B product, and B2B service. We know it’s important to look at individual sectors in order to get the best 360-view of how your business is doing within your space.
- 16.0 percent of the overall budget for B2C product
- 14.9 percent of the overall budget for B2C service
- 9.2 percent of the overall budget for B2B product
- 8.9 percent of the overall budget for B2B service
In part because of how competitive the consumer space can be, we found that most B2C marketing budgets are a larger portion of the overall annual spend for the companies surveyed. Within the B2B space, there are often fewer competitors and more distinction of value propositions, so those B2B companies offering services don’t necessarily need to spend as much of their overall budget on marketing.
Updating Marketing Budget Based On A Percentage of Total Revenue
If looking at your marketing budget as a part of your overall budget doesn’t make your heart flutter, then what you can do is approach your marketing budget as a percentage of revenue. By looking at revenue, you can get your sales and marketing teams on the same page, because the marketing department needs the revenue generated by the sales folks to make their budget happen. Another benefit of using your revenue is that you can adjust up or down, depending upon your employees’ wins.
When looking at the average of B2C product, B2C service, B2B product, and B2B service, marketing spend is 7.9 percent of a company’s revenue. This is down from a high of 11 percent of total revenue from six years ago, but up from 6.9 percent the year prior. We predict marketing spend as a percentage of revenue to increase year over year, especially if the GDP of the US remains high. People like to spend when times are good.
But, once again, the actual percent spent depends on if you’re in the B2B or B2C space. Let’s look at the individual averages for the B2C and B2B spaces regarding marketing spend.
- 9.6 percent of revenue for B2C product
- 11.8 percent of revenue for B2C service
- 6.3 percent of revenue for B2B product
- 6.9 percent of revenue for B2B service
As you can see, B2C companies tend to spend more on marketing than B2B. Of note is that those offering services often spend more than those offering services. Keep that in mind when you’re examining your budget and how to position yourself for success in 2020.
Adapting Your Budget Based On Your Average Cost Per Lead
Now, if percentages aren’t your thing and you have a strong sales process, then you can look at your marketing budget in 2020 from the perspective of the average cost per lead. Careful, this does require extensive knowledge of your sale cycle from start to finish. By looking at the cost per lead and the percentage of leads that turn into sales, you can reverse engineer how much budget you need to put behind your marketing efforts to generate your ideal 2020 revenue. If you don’t know how you can figure out your cost per lead, then this method isn’t right for you.
Our research has shown that cost per lead can vary wildly by industry. For example, according to Hubspot, some costs per lead can be as low as $11 (media and publishing) to as high as $100 (financial services). Knowing the industry average for your cost per lead can help you determine if your marketing strategy is working or needs revision.
We know it’s not enough to look at the cost per lead within your industry. You also want to make sure the cost per lead is appropriate based on the channel and approach you are using. Here’s how the cost per lead stacks up by channel, according to SurveyAnywhere:
- $14 for SEO and content marketing
- $27 for social media
- $33 for retargeted advertising
- $39 for email marketing
- $43 for social media advertising
- $45 for webinars
- $54 for referrals
- $60 for search engine advertising
- $71 for Google Ads (Display and Search)
As an aside, email is one of the most effective channels, despite its higher price tag for cost per lead when compared to SEO, content marketing and social media. Adding in video (even a link to one) within an email campaign or subject line increases open rates by 19 percent and clickthrough rates 200 to 300 percent. If you haven’t already, you have to start thinking about how to incorporate email in your overall marketing strategy and budget. We think it’s critical to have access to your customers outside of platforms like Facebook and Twitter. Imagine they closed up shop overnight. Would your business survive? How would you find your customers again? Don’t leave email on the backburner in 2020.
Getting The Most Out of Your Marketing Budget in 2020
Just you knowing what percentage of your budget is going to marketing does not paint the complete picture for your company. Within a 2020 marketing budget, you really must look at the holistic view of where other companies are putting their resources. You don’t want to be outspent by the competition, but you also don’t want to spend way more than you have to. It’s easy to think marketing is all ads, but the real special sauce is in ensuring your team has the resources and knowledge to be successful in the year ahead.
According to a CMO survey, across B2C and B2B, the majority of marketing budgets included the following line items from those surveyed:
- Overhead costs (65.7 percent)
- Marketing research (67.1 percent)
- Marketing analytics (73.4 percent)
- Marketing employees (74.4 percent)
- Social media marketing (82.1 percent)
- Direct expenses of marketing activities (92.3 percent)
Less than half of those same respondents included sales employees (21.7 percent), sales support tools (41.1 percent), marketing training (46.9 percent) and mobile marketing tools (46.9 percent) as part of their overall marketing budget. This means if you include sales employees in your marketing budget and the majority of other firms do not, your marketing budget could look higher than average. It does not necessarily mean you’re spending too much, but rather that you might be putting more resources in the correct place! (Seriously, sales is a part of marketing and vice versa.)
Don’t Skimp On Investing In Knowledge
We found that investing in capability development is a top marketing knowledge priority for businesses going into 2020. The better trained and knowledgeable your team, the more effective your 2020 marketing budget will turn out. In fact, there is an upward trend in investing in training and development, with an average of 4.2 percent of marketing budget going toward that line item.
You have to help your team grow in a professional capacity by helping them keep their skills sharp. You’re in great company – expanding employees’ capabilities is a major priority for most firms. You can’t neglect investing in the most important resource – the people behind the mysterious marketing curtain!
If you don’t invest in their knowledge, then their knowledge will get stale and so will your results.
Don’t Be Afraid To Put More Budget Toward Digital
We know for a fact that traditional media continues to lose share and attention to digital. This means that most marketing budget dollars are shifting toward digital assets. Between smart phones, tablets, laptops and virtual assistants, you’re more wired than ever and so too are your customers. Excuse us while we answer this quick text while checking our email … you get the idea.
We looked at the research and studies and found that the in latest CMO Survey, those who were surveyed planned to allocate 54 percent of their marketing budgets to digital advertising. That’s up a full ten percent from 2018. More than 95 percent of the individuals who answered were at the vice presidential level or higher. These are major players making important, strategic decisions. We know that this means you need to plan on spending a large portion of your budget on digital. Don’t be shy about the multiple opportunities to get your message out in cyberspace. You must incorporate digital into your 2020 marketing budget if you want to remain competitive.
The need for you to push more marketing dollars toward digital makes sense when you realize that about a quarter of US adults say they are almost constantly online. You know you have to go where your audience is at. Newspaper circulation is down because people are content to consume their information via digital feeds. Instead of taking out quarter, half or full-page ads, it’s time to think about page rank and hacking the algorithms that rule our digital lives. We also realize that digital is more than social media. It can include search engine marketing like pay per click (PPC) and landing pages, in addition to Search and Display ads. You have to look at your digital strategy beyond social media.
And it’s important to think about your content and strategy from a mobile perspective, as one in five US adults are smartphone only internet users. Furthermore, even in B2B spaces, people turn to their mobile devices to quickly access information in a convenient way. Think about how often you check in on email with your phone or quickly buy something you thought of off an e-commerce site because you had your phone handy.
Where can you start? If you want to be ready for 2020, look at refreshing your website to be at least mobile ready (even better if you make sure your site is mobile first). You have to think about peppering in embedded videos. We mean, 59 percent of executives would rather watch a video than read a wall of text, when presented the option. But, when you add in video, don’t forget to work with your website developer to ensure that your page’s loading time (and by extension page rank) aren’t negatively impacted. People aren’t going to wait for a page to come up. This isn’t You’ve Got Mail.
We Hate It, But Social Media is Pay to Play
We found that a full 12 percent of marketing budgets are dedicated to social media, up 243 percent from 2009. Social media is here to stay and you need to be prepared to cough up cash to participate. In part, this is because platforms such as Facebook have made it harder and harder to reach your audience in an organic way. More and more, the algorithm on Facebook won’t show content from brands and companies unless you cough up cash, even in small amounts. Many businesses have spent years (and lots of money) building up their audiences, only to get strong-armed by these platforms with lower reach and less engagement on their organic posts, which in turns forces those businesses to promote or boost their own content to be seen by the audience they built. We’re just as sick of seeing how much more reach our top-performing post could have if we just paid Facebook $20 to do it.
Where should you look to put that 12 percent social media section of your marketing money in 2020? Look into your Google Analytics (if enabled) and see where your social media traffic comes from. Hopefully, you know what your website goals are (number of pages, download of a white paper, etc.) and from there, you can determine which social channels bring in the best quality traffic.
What can you do if you don’t have analytics of where your traffic comes from? You can turn to the social platforms themselves and review an individual post’s performance. Some of the platforms will report how many times the link has been clicked. From there, you can see if one place potentially drives more customers to your landing pages (you do have landing pages set up, don’t you?).
What Social Channels Are Most Effective?
When it comes to ensuring the money you invest in your business is well spent, you have to know if your marketing efforts are working. Effectiveness is a relative measure. Most folks will remember the very last ad or call to action that tipped the scales and moved them into buying. But they might not attribute the many touchpoints that it took to make their final decision. Some social channels are effective because most people are on there day to day. Other social channels are effective because they provide social proof and help build trust within a community (e.g., product reviews). But, for 2020, here are some of the most effective social channels to include in your marketing budget.
- LinkedIn (especially for B2B)
- Messenger Apps
- Google Ads – Search and Display (includes YouTube!)
We’ve Scoped Out These Emerging Digital Opportunities
Ready to find the next Facebook? Within the digital landscape, there are many emerging opportunities. Here are a few to keep your eyes on in 2020.
- Anchor for podcasts
- Caffeine for live streaming
- TikTok for short mobile videos
- Vero for social media
One of the more difficult parts of any emerging social media is balancing the desire to get in on the ground floor with the time and energy (and by extension, money) that it takes to truly participate in the community. Being part of a community is more than posting content regularly. It’s about the give and take, ebb and flow that happens on the platform. As it becomes harder and harder to get discovered and found, be prepared to put more marketing dollars behind promotion and brand awareness.
If anything, looking into emerging platforms may provide some insight into how the major players (and biggest competitors) might react to the threat. In the past year alone, Pinterest has begun to make its feed look more and more like Instagram.
Watching these emerging platforms may give you ideas on how to make your more established platforms shine more. All the best companies do it – take the good ideas and mold them to their audience. Instead of having to react to changes on bigger platforms like the Apple Store, Twitch, Instagram or Facebook, you might be able to be proactive.
Don’t Forget Traditional Media
Yes, many companies are planning on putting more than half their marketing budget toward digital assets. Plans for spending via traditional media are down 1.2 percent from the year prior. But don’t forget about the other 46 percent! (Which isn’t all dedicated to advertising, but still, bear with us.) A solid marketing plan includes using traditional media opportunities to maximize exposure and ROI.
According to the Pew Research Center, 68 percent of US adults use Facebook. With the majority of these folks on social media, it might be tempting to assume a lot of sales are completed online. Not so. In fact, the February 2018 CMO survey found that a mere 12.8 percent of sales (which represents an average of B2B and B2C industries) come from the internet. Now, some industries have much higher percentages, such as education at nearly 33 percent, so make sure to check your own industry’s average.
Stop Making Your Marketing Department Cry And Remember Campaigns Take Time
Every marketer wants you to remember that campaigns take time and testing. Depending on the platform, one ad on one platform may not be enough. Whatever your marketing budget is, remember to add in flexibility to extend or shorten campaigns as needed. If your budget is too rigid, you may not be able to react nimbly enough. While it is important not to spend all your budget in Q1, you also don’t want to get too tight-fisted in Q3 worrying about Q4 budget.
Allowing for flexibility within the marketing budget, especially if there are any plans for growing the business or launching a new product or service, will give your marketing team the best chance at helping reach your 2020 revenue goals. Also, we want to remind you that you won’t necessarily see results the first day an ad campaign runs, so don’t get impatient while your team gathers data to make decisions.
Know Thyself And Use Data to Inform Marketing Decisions
All of our marketing budget recommendations are based on information from other companies. Other companies are not necessarily going to be the right mirror for you to reflect your successes or failures on. We know from years in marketing that it’s important to gather data year over year. What works for one industry might not work for yours. For example, if you track that one social media platform results in more conversions than another, then don’t pour all your money in a different one that doesn’t provide the same results, even if other companies are using it.
Knowing where your wins are coming from is key. Failure to track where leads and conversions come from means wasting precious dollars. By using data and hard facts to inform your strategy, you can better figure out who your audience is and how to best pinpoint where those individuals are located.
We all know that keeping good data and charting progress month over month often provides valuable insights, even if those insights come from dips and ebbs. Whenever possible, try to look at historical data as well. For example, does one month’s dip in performance indicate a downward trend, or is that change in performance typical of that month?
Good data also helps you understand where to plug in those marketing dollars. Sometimes not only do campaigns take time, but closing the sale take time. This is particularly true in the B2B space, where some sales take several years to close due to the length of contracts and decision-making process. For example, if you know that it can take upwards of three years from an initial contact to close, then you want to have that data available so you can better understand your overall pipeline. Better data helps inform better business decisions.
2020 Is Absolutely The Year To Add Video To Your Marketing Mix
No matter what your marketing budget pie looks like for 2020, make sure you consider where you can add video to your mix. We know for a fact that video helps cut through the marketing clutter. You need to know that year over year between 2016 and 2017, views of branded video content increased 258 percent on Facebook and 99 percent on YouTube. Video is a powerful part of the marketing mix and should be added in where appropriate.
Keep in mind that quality video takes planning and budget. You want to ensure the type of video you choose (animation, testimonial, live) makes sense for what you do and what your audience expects. Looking back at the emerging platforms, three have images and/or video as part of the presentation of information. People are visual creatures. With 73 percent of US adults using YouTube (as compared to 68 percent who use Facebook), it’s clear there is a preference to watch rather than read. People are still watching the equivalent of television, but they are choosing what they watch and when they watch it. So, create good video content and work with your marketing team to get that content in front of the correct audience.
TL;DR – Here’s How Much You Should Budget For Marketing in 2020
Here’s what you need to keep in mind after reading this article (or cheating and scrolling down to the bottom and missing out on valuable information!) – Most businesses spend about 11.1 percent of their annual budget on marketing. There is a push to put more dollars into digital, with social media gobbling up 12 percent of the digital marketing budget. But social media isn’t the only place to plug in your funds. Traditional media is still important, particularly because the buying process still takes several touchpoints to convert someone (or a business) to a purchase. Keep your marketing budget somewhat flexible to respond to emerging opportunities and remain nimble. Don’t forget that video is a powerful element to cut through the marketing clutter in 2020.
If you’re ready to get your 2020 off to the right start, contact one of our video strategists today!
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