“Show me the money”. You gotta spend money to make money.

You’ve heard the adage, ‘there’s no such thing as a free lunch’. The same applies for getting results. You get nothing for free.

We’ve seen some great memes lately about marketing budgets, or most significantly, the lack of marketing budgets and the expected return-on-investment (ROI).

The topic of marketing budgets has long been a contentious one, and not just during times of economic downturn. For future reference, the rule of thumb is an organisation’s marketing budget should be approximately 5% - 10% of revenue. We do advocate for closer to the 10% mark.

In fact, in a 2024 survey of Chief Marketing Officers (CMOs) in the UK, reported by Marketing Week*, findings indicated that “marketing budgets have dropped to 7.7% of overall company revenue in 2024, according to research from Gartner’s Annual CMO spend survey.”

There are some intricacies in setting marketing budgets that we won’t get into here, we simply don’t have the word count for it, but we will quickly touch on the fact that the aforementioned 10% is above and beyond the budget required to ‘keep the lights on’, that is, infrastructure, systems, agency and staffing costs. We are talking about 10% should be included in marketing for spend on getting your brand ‘out there’, whatever that looks like.

Now, let’s move on.

So, why is it that we continue to see ever-dwindling marketing budgets, and the horror of all horrors, even cuts to marketing departments (that is for another blog, but we cannot fail to mention it here).

When we’re asked, or should we say, often asked, why marketing budgets (and departments) are always the first to be cut, our answer is simply: marketing is often viewed as a cost centre that doesn’t make profit. Some even say that marketing is a ‘discretionary and non-essential spend that doesn’t impact a company’s operations’.

Scoff! Horror! Yes, we don’t understand this school of thought either, nor do we support it in any shape or form.

Let’s play a quick game…

• How do your customers find out about your business?

• How do your customers generally connect with your business? Telephone? Email? Social media? Website? In-store?

What happens when advertising stops, social media stops, PR activities stop, events stop, the website isn’t updated? The phones stop ringing. Emails dry up. Leads via your website dwindle. Customers stop connecting with your business. This translates to a reduction in leads to convert, a loss in revenue, job cuts and more. How does this happen? Marketing budgets have been cut. And marketing departments have been cut.

When businesses cut the marketing budget, or don’t allocate enough marketing budget, this has a direct impact on a businesses’ revenue. Marketing may be a cost centre, but it has a direct impact on your brand’s market presence and profitability.

Too often we see allocation of marketing budgets coming in anywhere between the 0.5% - 2% mark of revenue. Then, to the amazement (or even vindication) of management teams, they don’t see the results they were expecting, or hoping for. This often commences a vicious cycle, which further ‘justifies’ a lack of investment in marketing budgets, leading to marketing departments under pressure to do more with less, scrimping on allocation of budget and trying to find where best to spend their measly budgets to meet the often very high targets. And the vicious cycle continues. Marketing budgets get cut. Results are poor. Marketing budgets get cut again. And round and round it goes.

Sure, even we’ve been guilty of trying to put a positive spin on small (even non-existent) budgets by saying it makes ‘better marketers’ as you really have to get creative about your marketing efforts. The reality is to make money, you need to spend money. And, if your business is in the business of making a profit and staying afloat, then investing in your marketing budget (and department) is critical.

Marketing budgets ebb and flow depending on business strategy and the marketing strategy required to meet strategy. Some quarters, and years, may be leaner than others, and some may be larger. That’s just the nature of the game.

Here’s the rub. Investing in your marketing budget is investing in your business and your brand. Pure and simple. The investment means you can meet your business objectives and marketing goals; build brand equity, grow revenue, engage with your customers, secure new leads, and even take your business to the next level.

* Source: https://www.marketingweek.com/marketing-budgets-total-revenue/