How much should i spend on marketing?

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How much should i spend on marketing?

People generally recommend using the rule of thumb, where companies should spend around 5% of their total revenue on marketing to maintain their current revenue level. Companies looking to gain a bigger market share should spend around 10%. Nonetheless, the answer always varies by several factors. What is your industry? What is your growth rate? Your personality? We all know high marketing budgets aren’t sexy but they are directly correlated to business growth.

So within the budget, how can I allocate my budget into different advertising methods? For instance, if you are in an industry like real estate, then you may decide to spend more on traditional marketing (Branding, Flyer mailout, and outdoor advertisement) instead of Google Adwords or promoting your business through community events and send out flyers to neighbours. If you run a B2B business which is more complex and has a longer sale cycle, then the typical Google Adwords won’t work for you. You may reach out to your potential client through the email blast, referrals or even direct mailing!

Another example here, if you operate a food delivery service in local areas, you should definitely spend most of your budget into Google Adwords or Social Media Campaign. Yet, your CPC(*Cost Per Click) should remain less than 15% of your product’s value. In fact, in competitive industries, you may have to pay more just to get the same results. However, you can always see and track and record your ROI, distinguishing the source of leads. Here is the average cost per click in Adwords across all industries.

Average CPC in Adwords across all industries

  • Advocacy – $1.43
  • Auto – $2.46
  • B2B – $3.33
  • Consumer Service – $0.81
  • E-commerce – $1.16
  • Education – $2.40
  • Employment Services – $2.04
  • Finance & Insurance – $3.44
  • Health & Medical – $2.62
  • Legal – $6.75
  • Real Estate – $2.37
  • Technology – $3.80
  • Travel & Hospitality – $1.53

So, where exactly should I spend my marketing budget? Google ads? Facebook ads? traditional flyer mailouts? or even TV Commercials? Well, we have a simple marketing solution.


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Here's the breakdown for you.

Google Ads
You should definitely throw some ads on Google and target people who are already looking for your services or products. Google has the majority share of the traffic and searches and will almost always be the best place to gain targeted traffic. Setting up your ads isn't that difficult, you can set up multiple different ads or set up a dynamic one so you can have the best performing parts of your ad show to everyone and filter out the rest over time.

The CPC for your ads will vary depending on your niche as you mentioned above, so be sure to factor that into your budget. You might not be able to run your ads at $100+ per day but you can build up to that if your website is optimized to increase conversions. The more targeted traffic you send to a website that has a high conversion rate, the more likely you'll get a sale, and that means more money can go into your ads. If you're not bootstrapping your ads and you're going out buying steak dinners, you're not going to be successful. If you spend your profits right away you'll always be stuck in the same spot. Your business makes money and that money stays with it, reinvest the money into your ads and make 2x or 3x your investment from when you started How much should i spend on marketing?

Facebook Ads
I like Facebook ads because the targeting is so specific. I can target stay at home moms who have a higher likelihood of purchasing online during the day. I can also target people who manage Facebook Pages, people who live in specific regions or countries, I can even target people that like my own pages or I can exclude them from the targeting entirely.

Facebook ads can be tricky though, you could get a lot of clicks and no conversions, and that's why you'll need to sift through all of your targeting and be sure you have a campaign that works.

Traditional Flyer Mailouts & TV Commercials
Don't even think about using these unless you're willing to burn the money in your pocket. The conversion rates for these are difficult to figure out since you can't really track anything. I've never done a commercial, but I've done mailouts a few times, and the number of people that signed up wasn't nearly as much as I had thought.

I've even done door hangers on businesses and didn't get much response. I designed and purchased 1,000 door hangers that were made to target business owners, then me and my partner drove around at night and hung them all over a 2-night period. I got 3 calls and only 1 of them signed up. I did profit from this because the package I was selling cost $1,500 but in the long run, I'd never do it again because it's a lot of work and you don't really get much payout in the end.

If you're only looking to invest 5% to 10% of your profits back into your company then you're going to be losing out to the person or business that is willing to invest all of their profits to boost their company as fast as possible. You can't really put a percentage on how much you should invest when you're in the startup phase, so don't even think about it, just think about how you want to be successful and you're willing to live like a poor person even if your business is making $10,000+ per month. Reinvest a majority of your profits, keep some for taxes, keep some for daily expenses, keep some for food, and invest whatever is leftover.

Also, invest in some SEO so you don't have to rely on ads as much down the road How much should i spend on marketing?

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How much is 10%? Every plan has its price.

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Actually, there are many free of charge options for improving your site traffic and visibility. Many agencies are offering free campaign trials, including the one that deals with influencing marketing. Check this article in order to get more information.

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