How to Set Your Marketing Budget and Prove ROI

Emily Gorman

Emily Gorman About The Author

Mar 8, 2022 10:25:00 AM

How to Set Your Marketing Budget and Prove ROI

As contradictory as it may sound at first, you should always begin with the end in mind when it comes to setting a marketing budget and deciding which metrics to track to prove your marketing ROI. It's the best advice you will get on the topic since planning with a solid budget and proving ROI will allow you to get the most out of your marketing and impact your bottom line. 

Marketers that document their strategies are 313% more likely to report success, and marketers who plan out their projects, campaigns, and budgets are 356% more likely to report success.   

Here's how to set a marketing budget and everything you need to know about proving your ROI.  

Learn more about measuring your ROI

The Importance of a Marketing Budget 

Screen Shot 2021-09-24 at 10.17.33 AMSimply put, the importance of a marketing budget is so that you can control your spending. You want to be sure that you are putting enough money into marketing to take advantage of its many benefits (i.e., improving your brand reputation, sales, customer relationships, trust, credibility, awareness, etc.). 

On the other hand, you don't want to overspend on your marketing, either. In these cases, overspending typically includes engaging in marketing activities that aren't reaching and resonating with your audience enough to deserve an allocation of your budget (i.e., wasting ad spend on getting your message in front of uninterested consumers). 

What does a marketing budget include?  

The more detailed your marketing budget, the better. However, you should at least begin with the basics:  

  • List of marketing expenses, including dates 
  • Budget/projected costs versus actual spend (added in later) 
  • Total spend 
  • Visual charts 
  • Notes are always a plus to inform future decisions and fill in gaps where you may be confused about an activity or cost 

What should your marketing budget be? 

Your marketing budget will likely be different from others. This is because it's meant to be specific to your company size, brand, and needs. With that in mind, the U.S. Small Business Administration (SBA) recommends that small businesses allocate between 7% and 8% of their revenue to marketing (assuming you have revenue less than $5 million and margins between 10% and 12%). 

Marketers devote between 7% and 10% on average, with many bumping those figures up to 13.2% in 2020.  

Some elements to consider when setting your marketing budget: 

  • First and foremost, know what you can afford. 
  • Consider your industry and type of business (B2B or B2C) when crafting your budget since it will vary. 
  • Look at the big picture — what is it you're trying to achieve with your marketing? 
  • Costs of performing activities on each marketing channel 
  • Working with a media partner can help you best determine how to allocate your ad spend for the best results 

What is ROI?  

Your return on investment (ROI), also known as return on marketing investment (ROMI), is how much revenue you get back on a marketing initiative. For instance, if you invest $100 and get back $150, you're looking at a positive ROI. 

Calculating ROI  

To calculate your marketing ROI, you'll need to follow this formula: 

ROI = (Sales Growth - Marketing Cost) / Marketing Cost 

Say your marketing initiative cost you $200 and brought in $1,500 in sales. In this case, your marketing ROI would be 650%. 

Tracking your ROI  

Screen Shot 2021-09-24 at 10.17.24 AMTracking your ROI is important to collecting data and evaluating what to do with it, such as cutting underperforming initiatives out of your budget or increasing allocation to an effective initiative.  

How you track your ROI will depend on the initiative you're tracking. All should be tracked to provide you with an overall ROI at the end of your campaigns.  

How to measure your ROI  

In addition to tracking your marketing ROI, you will also need to measure your ROI. To measure ROI, you'll want to:  

  • Segment activities 
  • Align goals 
  • Check traffic sources 
  • Establish KPIs and regularly measure 
  • Conduct customer research 
  • Automate and integrate platforms 
  • Track leads 
  • Consult your clients via feedback and surveys 

Improving ROI  

To improve your ROI, consider:  

  • Defining your potential returns and calculate your returns 
  • Generating more sales and/or raising prices 
  • Evaluating and re-evaluating your expectations and dollar benefits 

Maximize Your Marketing Budget and ROI  

Since every marketing budget varies depending on specific brand factors, it can be challenging to find the right fit for you. You can consider many budget recommendations for inspiration, but it's essential to evaluate what works best for you over relying on what worked for others.  

Working with a media partner to develop your marketing budget eases the stress of that evaluation and ensures that you're prioritizing only the best initiatives for meeting your goals. 

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