Learn how much you should be setting aside for marketing, which marketing tactics your budget should include, and how to prioritize spending according to your specific goals.
How to Spend Your 2021 Marketing Budget
Many organizations kissed their 2020 marketing plans goodbye as early as Q1. As we approach 2021, brands in virtually every industry are preparing for an abnormal year in terms for budgeting. Some volatility is expected to continue through at least the beginning of 2021, and it’s unlikely that line items like events will see much of a boost in the coming months. Almost half (44%) of CMOs faced mid-year marketing budget cuts in 2020, so this is a unique year for marketing.
If your organization is ready to set (or adjust) your 2021 marketing budget, this guide is for you. We’ll begin by walking you through the basics of setting your budget, many of which are unaffected by our current landscape. Then, we’ll also share how the pandemic has affected marketing and what that means for budgets in 2021.
Let’s dive in!
Why It’s Important to Invest in Your Marketing Strategy
Whether your business is trying to recover, hold steady, or grow, it’s difficult to overstate the importance of a solid marketing strategy. Marketing is the backbone of growth. It creates brand awareness, generates leads, drives purchase intent, and, ultimately, gives you customers that you wouldn’t have reached otherwise.
Because marketing efforts are so flexible, many businesses cut their marketing spend at the first sign of trouble or keep tight marketing budgets to invest in other areas of the company. Pausing a Facebook ad or cutting back on your blog content might seem like a convenient way to conserve resources, but at the end of the day, you’re doing a disservice to your brand.
Countless studies have shown that brands that ramp up their marketing investments during economic downturns enjoy greater gains in sales and market share than brands that cut back in the same time periods—both during and after the recession occurs.
So, what’s the key takeaway here? Marketing is often a precursor to revenue, so it’s time to give some serious thought to your 2021 marketing budget.
How much will you set aside to spend? What are the different marketing tactics you might explore? Which marketing efforts are most important for your business? What are the trends in marketing spending across different industries? How should you account for uncertainty and volatility?
We’ll answer all of those questions in the following sections. We’ll walk you through the planning process for deciding what your budget should be, how you might want to allocate that budget, what decisions other companies are making about their marketing spend, and some final thoughts about implementing all of this information.
How to Plan Your 2021 Marketing Budget
We’ll begin with an exploration of how much money should be included in your marketing budget in the first place. One thing to note here is that not all companies are consistent in what they consider “marketing,” giving some fluctuation to publicly-available figures. For example, there are some discrepancies regarding whether or not to include costs associated with things like social media, marketing training, and sales staff.
You’ll have to decide what your classification of “marketing expenses” includes. If you decide not to include these “extra” costs in your marketing budget, keep in mind that they’ll still need to be allocated somewhere else if they’re included in your company’s expenses.
There are also differences in how companies handle irregular, expensive marketing costs like website updates (62% of companies say they believe a website should be redesigned every two to three years!) or rebranding. Because these expenses are inconsistent and won’t be relevant most years, some companies leave them out of the budget until they’re necessary. Other companies allocate the funds across several years to distribute them more evenly. Either approach works, as long as you remember that those irregular costs will come up from time to time.
With those clarifications in mind, we’ll take a look at a few common methods for setting a marketing budget. But first, a rule of thumb to consider as you’re getting started with budget planning.
Your marketing spend will (and should) vary depending on the lifecycle of your business (i.e., whether your company is a startup, is in a growth phase, or is more mature and established). Each of these scenarios comes with its own set of priorities and financial considerations. We’ll dive into each scenario below to give a very broad idea of what you might expect to spend in each case.
New companies or startups may find that their funds are limited as they’re getting their concepts off the ground. This becomes a catch-22 for many startups: You have to spend money to make money, but you have no money to spend. Your marketing budget at this stage will probably be limited—often somewhere around 5-10% of gross or projected revenue. The reasoning behind this limitation is that other areas of the business may take precedence at this stage, like fully developing your product or website.
The startup phase is also typically not the time to be experimental with expensive marketing tactics that have risky returns, and this is doubly true for 2021. Given the volatility that we’ve experienced throughout 2020, even established, high-profit companies are approaching 2021 with a risk-averse approach. In a 2020 Gartner study, 69% of survey respondents stated they would focus on conserving the status quo or taking risks only within limited guardrails.
Our recommendation? Start with whatever you can comfortably afford to spend, spend it wisely on the marketing tactics that are likely to drive sales, and then reevaluate when you have more funds available.
Companies experiencing a growth stage and trying to scale quickly should be prepared to invest more heavily in marketing. A common benchmark here is spending at least 12% of revenue, and aiming for closer to 20% or higher. This approach also applies to challenger brands that are facing heavy competition in their industries. In these situations, marketing investment can be used to stand out from the pack.
Finally, mature companies can often cut back on their marketing budgets. Because a mature brand already has an established brand and client base, less capital is necessary to bring in the same amount of revenue. You might have heard that it’s cheaper to satisfy an existing customer than to acquire a new one, so when customer acquisition is no longer the primary marketing goal, you may be able to achieve the same results even with a scaled-down budget.
With those distinctions in mind, let’s talk about some approaches to setting a budget.
Approach #1: The 10% Rule
For years, the standard advice about marketing spend said that a marketing budget should correspond to 10% of your company’s annual revenue. This held true for 2020, too; as CMOs entered 2020, they anticipated budgets that averaged 11.0% of revenue. While this figure might work for some companies, the blanket generalization can be dangerous.
As we saw earlier, there’s some variation in budgeting for different brand life cycles, with newer brands often spending more than established brands. There’s also usually some variation according to industry and whether a brand is B2B or B2C. For example, 65% of B2C indirect sales companies expected their 2020 marketing budgets to increase from 2019, while only 46% of B2B manufacturing companies said the same.
According to a Gartner report, the average marketing expense budget in the US and the UK is at 10.5% of revenue, so the 10% benchmark can work well for many companies. The importance lies in analyzing your own brand, goals, and resources to decide what will work for you.
To try to understand whether the 10% figure holds true for most companies or not, we looked into the financial records of three companies: Salesforce, Microsoft, and Nike.
Case Study: Salesforce
For the 2020 fiscal year, Salesforce’s marketing budget was equivalent to almost half of its revenue, coming in at 46.3%. This value is obviously significantly higher than the 10% benchmark. If you dive into the company’s annual report, you’ll find that Salesforce spent 7.9 million dollars on marketing and sales in 2020, a figure which has been increasing steadily over the past few years. It’s clear that as Salesforce grows, it continues to reinvest in marketing, and the company’s marketing spend has hovered around 45% of revenue for several years.
What goals are the priority with this level of spending? The annual report sheds some light on this topic:
“Our marketing strategy is to promote our brand and generate demand for our offerings. We use a variety of marketing programs across traditional and social channels to target our prospective and current customers, partners, and developers. We focus our marketing activities on the cities and countries with the largest market opportunity.”
[Note that this language hasn’t changed compared to previous annual reports, so this is likely a reflection of the brand’s long-term strategy.]
The company’s specific tactics include everything from multi-channel marketing campaigns to participating in industry events to investing in tools that make the sales department more effective. Spending almost half of its annual revenue on marketing seems to have paid off, because, for the same year (FY 2020), Salesforce enjoyed a revenue increase of 29% over the previous year. In this case, the trend seems to be confirmed: Marketing = growth!
Case Study: Microsoft
To get a second opinion, we looked at Microsoft’s annual report for the 2020 fiscal year and found a similar trend. The company’s marketing budget was 14% of its annual revenue. It spent $1.4 billion more on sales and marketing in 2020 as compared to 2019 in order to invest in LinkedIn offerings and commercial sales capacity.
Microsoft’s report also shares a breakdown of its employee distribution, which reveals that 24.5% of the company’s full-time employees fall within sales and marketing roles. Microsoft explains later in the report that its “most significant expenses are related to compensating employees,” so it’s no small investment for almost a quarter of the company’s workforce to make up marketing and sales departments.
Taking into account this marketing spend, we see that Microsoft experienced revenue growth of 15% in 2020. Again, we see that upping marketing spend seems to be a successful way to generate interest in the brand.
Case Study: Nike
Finally, we looked at Nike’s 2020 annual report. Its annual report shares that one of its priorities is “influencing sports and fitness preferences through extensive marketing,” indicating that Nike sees marketing as an opportunity to shape consumer trends across the whole fitness industry—beyond just its own brand.
The company also shares that its approach to competing with other athleticwear and athletic footwear companies relies on “consumer connection and affinity for brands and products, developed through marketing and promotion.”
Finally, the report reveals that marketing expenditures are a key point of competition among companies in the industry, hinting that there is a pressure to maintain a marketing budget similar to competitors to keep up.
When it comes to the percentage of revenue allocated to marketing, Nike seems to follow the 10% rule more closely, with its marketing spend coming in at 9.6% of its annual revenue. With this more conservative approach to marketing, it saw a 4% decrease in revenue compared to 2019. However, as a business more focused in the B2C space than Salesforce or Microsoft, it’s likely that Nike experienced more volatility due to COVID-19. In the first half of FY 2020 (before the onset of COVID-19), the company’s revenue was up 9% YOY.
Pros and Cons of Using the 10% Rule
As with most business choices, using the 10% rule to determine your marketing budget has some notable pros and cons. Here are a few to keep in mind.
- Easy to calculate
- Similar to the average marketing spend for companies in the US and the UK
- Fluctuates naturally according to the financial success of the company
- Impossible to use for new companies that don’t have revenue figures yet
- Doesn’t take into account marketing goals or changing annual priorities
- High-performing tactics or projects may be neglected if they don’t fit into the 10% budget even though they could be worth the additional investment
Conclusions from the 10% Rule
While these three companies seem to confirm the trend that spending more on marketing leads to growth, it’s important to take the approach that’s right for your company.
It’s also worth noting that despite these perceived trends, there are many factors that contribute to a company’s growth. Investing in marketing is a common approach because the role of marketing is, in many ways, to grow the customer base (and, thus, revenue), but it’s not always as cut-and-dried as these metrics might have us believe. At the end of the day, each company is struggling with the same questions about how much marketing spend is ideal to promote growth and how much revenue growth can be directly attributed to marketing.
Approach #2: Adjusting From Last Year’s Budget
22% of today’s CMOs use “traditional” budgeting methods like reviewing the results of the previous year’s spending and increasing or decreasing the funds according to past performance and expectations for the following year.
We expect that given the volatility we’ve experienced throughout 2020, this is an approach many businesses will take this year. In the midst of uncertainty, it can help to start with baseline figures and adjust up or down from there. If you expect that this approach will work best for your brand, keep reading for the later section where we’ll discuss how budget allocation has shifted this year and which tactics are most likely to be prioritized.
As you begin to assess your marketing spend from previous years, you may recall the alleged quote from 19th-century retailer John Wanamaker, which says, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
Thankfully, today we have better methods to help clarify the success of your marketing efforts. According to Gartner, today’s CMOs use a variety of metrics to assess how a given campaign performed. When it comes to brand metrics, their priority is brand awareness. For monitoring performance and efficiency, ROI is the preferred tool. To look into conversions, the conversion rate is most useful. And, finally, for loyalty and satisfaction, customer satisfaction reigns supreme. These are great options to consider if you aren’t sure how to assess your campaign performance.
Prepare these metrics in advance of any budget discussion, and you’ll be more equipped to decide where your priorities lie for 2020. These are the questions you’ll want to ask yourself as you begin prioritizing.
What are your goals for the upcoming year?
This question should be the starting point for any discussion about future strategy, whether it’s budget-related or not. Take the categories for metrics above, for example. In 2021, are you more concerned about building brand awareness or improving your ROI? Is it more important for your brand to maximize customer satisfaction or cut back on costs? There’s no standard answer here, so you’ll have to think critically about the direction your brand is moving and how you can help it get there.
After you’ve decided on your goals, and only after you’ve decided on your goals, you can move forward with a discussion about tactics.
Which marketing tactics are critical to continue?
So, you know your goals. Now, remember those metrics you prepared earlier? Get those ready, because you’re going to need them. When you think about each of your goals for 2020, which metric seems to be most illustrative of success for the goal you have in mind?
You may have to get creative with your metric choices. While standard options like ROI or net promoter score (NPS) might be common, all-encompassing choices, maybe your website bounce rate is relevant to your goals for 2021. Or, maybe the number of shares for your Facebook content is important. Try to assess all the available metrics (and variations of those metrics that you could calculate) and choose whatever aligns most directly with your goal, whether it’s a buzzworthy metric or not.
Once you’ve picked a metric that seems to encapsulate success for your goal, take a look at how each of your past marketing tactics stacks up. A common approach is to increase investment in the tactics and channels that are highest-performing, maintain investment in tactics or channels that are contributing to your goals but not going above and beyond for your brand, and reconsider anything that doesn’t fall into those categories.
As you reflect on past success, it’s important this year to primarily focus on your 2020 numbers. A tactic that performed exceptionally well in 2017 is important to consider, but results from 2020 will be most useful for predicting 2021 performance. Because the marketing landscape has shifted slightly to account for the pandemic, even data from 2019 may already be entirely outdated.
Now that we know what we need to continue, let’s take a look at what we don’t need to continue.
What hasn’t been working?
This last question is especially important. If one channel or approach is consistently failing to contribute to your goals, it’s probably time to cut that expense for 2021.
It can be hard for companies to admit that they’ve invested time and resources into an approach that isn’t delivering. But, consider this—there are so many options for spending your marketing funds, so why not take the money you would’ve spent on a mediocre endeavor and use it to try something new instead?
There are always risks associated with innovation, but if the funds are already being wasted elsewhere, it might seem less daunting to start something new. In Gartner’s 2018-2019 CMO Survey, the company found that one out of every six marketing dollars is spent on innovation, so you’re in good company in deciding to think outside the box.
For this year specifically, we’d recommend also cutting back on any line items that have performed well in the past but were unsuccessful in 2020. An example of this kind of tactic (for many brands) would be in-person events. While large-scale conferences and activations might have been instrumental to your success in 2019 and earlier, in 2021, you may want to plan to keep things digital-only. If there’s no acceptable alternative (for example, if digital events won’t work for your brand), consider temporarily cutting the budget in those areas and make a plan to reevaluate for 2022.
Pros and Cons of Adjusting from Previous Years
This approach also has pros and cons, so we’ll share some for your consideration.
- Requires important decisions about goals and metrics
- Ensures that highest-performing tactics are prioritized and lowest-performing tactics are cut
- Allows for flexibility if some years require investing more heavily in marketing and growth than other years
- It’s difficult to encapsulate the true success of any given tactic with a few metrics
- Some marketing goals are difficult to assign metrics to
- There is no real upper limit to how many projects you could justify continuing, so the budget could be significantly higher than anticipated
- Doesn’t account for volatility and assumes that results/performance will be consistent year-over-year
Conclusions from Adjusting from Previous Years
The beauty of this approach is that it tries to take into account the success or failure of your marketing efforts and pivot to prioritizing only successful tactics. However, the variability and subjectivity involved here may create a gray area that makes some marketers uncomfortable. Again, it’s up to you to decide which approach will work best for your needs.
Approach #3: Flexibility
As we enter 2021, we’re seeing a new approach to budgeting continue to gain traction. 23% of CMOs say that they define budgets by justifying the costs of individual projects on an as-needed basis. Rather than going into the year with a set figure in mind, they may instead come up with a broad range, an extreme upper limit, or no benchmark at all. Then, as opportunities arise to spend money, they assess each one individually.
The flexibility here is interesting, and it seems to be increasing in popularity. In 2017, only 17% of CMOs took this approach, so the versatility of this method might become more standard over time.
Pros and Cons of Flexibility
To round out our pros and cons, we’ll touch on the implications of this flexible approach.
- Allows the most fluctuation to justify unique or one-time projects that require heavy investment
- Requires teams to consider the cost-benefit analysis of every project before committing resources
- Very malleable if the company’s goals and priorities shift from year to year
- Very little structure for teams that need more rigidity
- Potential for difficulty budgeting other areas of the company if there’s no benchmark for what marketing might cost
- Great projects at the end of the year might not get implemented if too many projects were approved at the beginning of the year
Ultimately, all three of these approaches have their place for the right companies. There is no concrete answer about which approach you should take, so it’s up to you to assess what will make the most sense for your company, your team, and your marketing efforts.
Once you’ve decided how much your marketing department will have to work with for 2020, it’s time to make some choices about how you want to allocate that budget.
How Other Companies are Spending Their Marketing Budgets
So, what are companies actually spending their budget on? Let’s dive into the numbers.
Our first analysis looks at marketing budgets broken down into four main categories: agency costs, martech (marketing technology) costs, media costs, and labor costs.
In 2019, overall, the categories were roughly equal. Agency costs fell at 22%, martech at 26%, media at 27%, and labor at 25%. In 2020, the landscape has looked just slightly different. This year, agency costs made up 24% of total spend, martech made up 26%, media made up 25%, and labor also made up 25%.
Let’s take a look at each category to assess what changed this year.
Many brands going into 2021 are working with an agency or outside partner for some component of their marketing strategy. There are dozens of agency types, so you may not even realize that some of these functions fall within the agency umbrella.
Some examples are design and creative agencies, PR agencies, traditional advertising agencies, and media buying agencies. Essentially, almost any part of your marketing strategy can be outsourced to an agency, so the cost of an agency partnership should, in theory, be counteracted by a decrease in some of your internal costs (in labor, martech, or media).
In a cost-saving effort due to the pandemic, 2020 survey respondents shared that 32% of work has moved from agency to in-house in 2020. Social marketing and content marketing were the top two types of work that were brought in-house in 2020, while programmatic media and traditional media were least likely to turn in-house.
However, at the same time, average spend on agencies has increased year-over-year. In 2021, we’ll have to watch this dynamic. While moving from agencies to in-house may seem like a cost-saving effort at first glance, it can end up being more expensive to build up internal capabilities that didn’t exist previously and to take on the risk internally rather than contracting with a professional partner.
Martech (Marketing Technology) Costs
Martech encompasses all of the digital systems and software that make it possible for your marketing team to do its job. The combination of tools that your company employs is referred to as your “martech stack.”
It might include content management systems like WordPress or Wix, SEO tools like Moz or SEMrush, content marketing platforms like HubSpot, video platforms like Vimeo or YouTube, graphic design tools like Adobe Creative Cloud, and whatever else your business has found to meet its marketing needs.
One thing to consider when breaking down your martech budget is that just owning or subscribing to these tools is not the only step—you have to implement them in a way that captures their full value. In one survey, 24% of respondents shared that adoption and use for new marketing technology is one of the top three weaknesses in their company’s ability to drive customer acquisition or loyalty. In another survey, marketers report only using 58% of their stack’s full capabilities.
In other words, many companies are investing in new software or tech products that solve problems for their company. However, problems with training, implementation, or compatibility with existing equipment are holding companies back from achieving the true potential of their new purchases. We’ve seen this trend continue for several years now, and Gartner reports that this continues to be a significant issue for many brands going into 2021.
Companies that allocate resources for this execution portion of their martech stack in 2021 will likely benefit from the investment and capture more value from their tech tools. One interesting finding for 2021 is that 68% of CMOs expect their martech budgets to increase, which may allow for prioritizing implementation more heavily.
Next, let’s take a closer look at the 25% of the budget allocated to media.
The channels that CMOs plan to use in 2021 will cover everything from websites to social marketing, email marketing, offline and TV advertising, SEO, virtual event marketing, and affiliate marketing, among others.
Let’s break this down a little further into owned media, paid media, and earned media.
Owned media is classified as any media channel that your team actually has control over. The most common examples are your website, your blog, your email campaigns, and your own social media channels.
Anything you post in these places is entirely owned by your company and is free to share (i.e., posting a blog article or an Instagram photo on your own account won’t cost you money).
Owned media is a critical avenue for content marketing, which is the creation of original content that is intended to provide value to your audience. Note that this type of content doesn’t have a direct promotional purpose—it will still contribute to the way consumers feel about your brand, but its primary purpose is to inform and entertain rather than to sell.
More companies than ever before are generating their own blog posts, webinars, white papers, videos, and more as part of a content marketing strategy. One study found that 89% of the most successful B2B companies were either “very” or “extremely” committed to content marketing, and those same companies spend an average of 40% of their marketing budget on these efforts.
One reason for this is that content marketing can have a significant impact on SEO. Many companies optimize all of their blog content and other website publications with SEO best practices in mind, so the content is dual-purpose.
Most marketers will distribute their content marketing efforts across a variety of channels, but content creation and management as a whole was the second-highest priority for CMOs in 2020, falling just below marketing analytics. In short, it’s very important.
Paid media is more aligned with what you might think of as traditional advertising efforts: branded content, display ads, PPC (pay per click) ads, paid influencers, and most other channels where you have to spend money to get your content in front of your audience.
Paid media is becoming increasingly digital. We were seeing this shift pre-2020, and the impact of the pandemic has only sped up the transformation. In 2021, CMOs expect to spend 22% (almost a full quarter) of their overall marketing budgets on digital advertising, including display and video ads and paid search.
The takeaway here is that digital is the future. We’ve seen this trend take hold over the last decade, and forward-thinking brands will prioritize innovating in this space in the coming years.
Much of this innovation is occuring in the video and display ad categories. Over three-quarters of CMOs said they were confident that they’d increase investments in these areas in 2020, with 37% of those holding firm on this content even if in a period of economic uncertainty.
This is worth noting—video and display ads shared digitally are so important to marketers, that these channels are worth continuing even if there is less money to spend overall. This makes sense when you consider the benefits of video digital content and the opportunities for customization and fluctuation in digital media. More than half of consumers want companies to put out more video content, so it makes sense that marketers are continuing to move toward this tactic in 2021 and beyond.
Because of the benefits of video content, it’s becoming increasingly important. A recommended benchmark for 2021 is to allocate 10-20% of your overall media budget (not your overall marketing budget) on video content. Gartner found the average for 2019 to be 19.8%, indicating that many companies are moving toward the higher end of this scale.
There are several reasons why the video portion of media budgets is growing. One reason is that there are more places to put native video every day, making it easier to get your content in front of an already-captive audience. Another reason is that video content has been proven to be more effective and generate higher conversion rates than other kinds of content, so marketers are adjusting according to what’s working best.
Note also that video content doesn’t have to be used only for paid media—it’s also commonly used with owned media. For example, you could make an “About Us” video and post it on your website. This video content is just as important and effective as paid media video content, but it’s considered owned media because your website is an asset that you own.
Regardless of how you distribute your video content, it’s a critical piece to consider for this year. It may seem like a significant portion of the budget to invest in video and creative, but to get effective results, you have to create great content.
Paid media also includes OOH (out-of-home) advertising (think billboards and other ads you interact with in public settings) and TV ads. One interesting point to note here is that in a period of economic uncertainty, these two channels are not priorities for many businesses. In a recession, 32% of CMOs said they would first decrease investments in offline media (OOH, radio, and print ads), and another 32% said they would first decrease investment in TV.
Earned media is the final media category, and it essentially encapsulates the concept of “word-of-mouth” marketing. When your audience shares or reposts your content, writes reviews for your brand, or posts about their experiences on social media, that media is earned. You didn’t pay for it or post it yourself, but you had to make your audience happy enough that they felt compelled to share your brand of their own volition.
You’ve probably heard about the power of social proof, which is the concept that people are naturally inclined to follow the ideas and choices of others, especially others in their social circles. Earned media draws on the benefits of social proof. It makes your brand’s claims seem more authentic because they’re being verified by an outside source that other people are likely to trust.
In a typical year, the labor costs category is the most clearly defined—it just includes compensation for your marketing employees. Normally, the only thing you have to consider here is whether you anticipate giving raises or adding new hires in 2021.
However, in 2020, we saw more volatility in labor costs than anticipated. 65% of CMOs surveyed mid-2020 had imposed hiring freezes, and many companies across industries unfortunately enacted layoffs to cut costs. However, some industries saw increased demand due to the effects of the pandemic, and rather than enacting layoffs, they began hiring sprees.
As you evaluate your labor costs for 2021, account for volatility as best you can. You know your industry best, and you’ve seen through 2020 whether labor costs have been sustainable or not for your business.
Marketing Costs List
Given all the breakdowns we just described, here is a list of some of the specific approaches you might include in your marketing budget for 2021.
- Search ads (Google Ads or Bing Ads)
- Social ads (Facebook Ads, Instagram Ads, Promoted Pins, LinkedIn Ads)
- OOH (out-of-home) ads (billboards, bus displays, gas station screen ads)
- Virtual event sponsorship
- Content marketing
- Influencer marketing
- Social media marketing (Facebook, Twitter, Instagram, Pinterest, Linkedin, Reddit)
- Physical marketing collateral (signage, postcards, flyers)
- Referral or affiliate programs
- Email marketing
- Video content marketing
- Virtual event marketing
- Co-branding and partnerships
- Branded contests
Other Trends to Note for 2021
Because 2020 was such an abnormal year, there are a few other things we’d recommend taking into consideration for 2021. In effect, several marketing (and budgeting) best practices have shifted as a result of the year’s volatility. Here are some final thoughts to take into account.
This is not the year to plan for campaigns that will take eight months to go live. Because of how quickly the landscape is changing right now, you’ll want to reduce the time it takes to go to market. For some brands, this likely means that multiple smaller campaigns are more practical than one or two large-scale campaigns. Don’t set yourself up for frustration when you’ve invested a ton of money into a campaign that’s already outdated and irrelevant by the time it goes live.
Consider Making Multiple Budget Scenarios
If you have the ability, this would be a good year to think through a few different budgeting scenarios. For example, if physical events have worked well for your brand in the past, you may want to create one optimistic budget scenario that allocates funds for an in-person event later in the year. Because we won’t know whether that’s feasible or not until more time has passed, having a few budgets prepared may come in handy.
Invest in Long-Term Assets
If you’re finding that it’s not possible to invest in many of your usual marketing efforts, now is a great time to invest in long-term projects like building up your SEO strategy or redesigning your website. Check out our article here for a list of tasks you can take on that will benefit your strategy for years to come.
Still stuck about how to actually move forward? Let’s take a look at a fictional example to understand your budgeting options and strategies.
The 10% Approach with Digital Priorities
Let’s say you have a fictional company with a revenue of $4,000,000 last year. Based on the 10% rule, your overall marketing budget for 2020 would be $400,000. Your team has decided to prioritize digital content in 2021 and wants to cut back on traditional media.
First, let’s allocate marketing labor costs. Set aside compensation for your existing team members and anyone you expect to hire in 2021. Based on the averages we shared earlier, this is likely to make up about 25% of your total marketing budget, so we’ll use that figure here for the sake of simplicity. This gives us $100,000 spent on marketing labor costs, and $300,000 left to allocate.
Of that $300,000, some will need to be used for martech. This might include tools your team is already using. For example, many marketing teams use HubSpot or MailChimp or SEMrush to aid them in their day-to-day efforts. Allocate the costs of any existing subscriptions, plus money for any tools you might begin using in 2020.
Remember that an important step in using new marketing technology is making sure your team really knows how to use it to its full potential, so don’t skimp on training costs or additional expenses needed to execute the addition effectively. Based on our stated averages, martech takes up an average of 26% of a marketing budget, so we’ll set aside $104,000 for that here.
Next, we’ll set aside our agency costs. Let’s say our fictional company uses an agency for some of their design and PR efforts. Based on the 2020 average of 24%, this would come out to $96,000.
The remaining $100,000 for media is where things get more interesting. We know that our priority is digital media, so maybe in 2021 we’ll invest in video content, building out an SEO strategy, and display ads.
First, let’s talk video. We revealed earlier that video should make up 10-20% of your media funds, so if our media budget is $100,000, 20% would come out to $20,000. This video content will cover both owned and paid media since we can use different channels to distribute it. A video shared as a paid social ad would be paid media, while a video we post on our website would be owned media.
Because we also need to consider irregular costs, let’s say that we’ve decided to update our website in 2020 and need to set aside funds for that. A website redesign can be expensive, with simpler projects often falling in the $15,000-$20,000 range, and more complicated projects ranging from $20,000-$40,000. We’ll go ahead and set aside $30,000 for the website redesign. This would fall within owned media because our website is an asset that we own.
Our final $50,000 for paid media is where it will become more important to consider the specific tactics and channels that deliver for your company. Maybe you want to use Facebook ads more extensively in 2021, or maybe you want to start an influencer campaign or host an event. Because this is a fictional company, we’ll make some arbitrary decisions, but you’ll have to really dive into the metrics for your own efforts to know what to prioritize. We’ll go ahead and assume that our main priority is display ads, so we’ll set aside $30,000 for that. We also want to start an influencer campaign that we’ll spend $15,000 on, and with the remaining funds we’ll host a virtual conference that will cost $5,000. Note that most companies will have more than just three costs that fall into their paid media budget—we’re just using three for the sake of simplicity in this example.
Add all of these components together and you’ll get the $400,000 that we started with.
With all of those decisions made, our budget is as follows:
|Marketing labor costs||-$100,000|
|Marketing technology costs||-$104,000|
|Video content (owned + paid media)||-$20,000|
Marketing Budget Trends Moving Forward
As we plan for 2021, many companies are also trying to think ahead to 2022 and beyond. Some trends seem inevitable, like the continued expansion of digital content, the development of new capabilities with incorporating AI and VR into marketing efforts, and the prioritization of video content creation.
Several sources have data-driven predictions about trends in the coming years. A Forrester study shares the following insight on what we can expect the marketing landscape to look like by the end of 2021:
“By 2021, CMOs will spend nearly $119 billion on search marketing, display advertising, online video, and email marketing. [By 2021], search will lose share to display and social advertising while video will scale.”
Hook Agency also predicts that video marketing will continue to grow, citing it as the fastest-growing marketing category. They also say that between 2016 and 2021, video content will have doubled in use.
They recommend that brands in 2021 prioritize video content in a number of ways, including creating a brand video that tells your story, making ongoing marketing videos to educate your audience, and creating a system to regularly repurpose your video content into other formats.
Ultimately, time will tell how the marketing landscape changes as we enter a new decade, but companies that will find success will likely be shifting toward digital channels, watching for new trends as they’re uncovered, and preparing for change in the midst of uncertainty.
To recap, here are some of our key findings for planning your 2021 marketing budget.
- Understand and respect the importance of marketing for driving growth.
- Decide whether you want your budget to be decided as a percentage of revenue, as an increase or decrease from the previous year’s budget, or with a more flexible, project-based method.
- Don’t forget to consider inconsistent costs, like website updates or rebranding, that don’t occur every year.
- Decide your goals for your 2021 marketing efforts. What will you prioritize?
- Analyze your past marketing spend according to the metrics that provide the most insight according to your goals.
- Focus on how your marketing tactics performed in 2020 to account for the current landscape, and prioritize those that did well in 2020 above those that did well in years past.
- Cut any tactics that have been consistently underperforming, and instead use those funds to try something new and innovative.
- If you’re investing in new marketing technology in 2021, see the process through to eliminate missed opportunities due to lack of training or execution.
- Stay ahead of the curve by prioritizing digital media content and videos, and don’t cut costs in these areas if you can help it.
- Invest in content marketing for long-term impact.
- Implement video content into your strategy as quickly as possible, and use videos frequently in a variety of channels.
- Get started!
We hope this guide has provided useful information to help plan your 2021 marketing budget. If you need more information or want to discuss how to create effective video content for your business, contact us, or check out the resources below.
- How to Plan Your Long-Term Strategy During a Pandemic
- Why Now Is Not the Time To Cut Your Marketing Budget
- 9 Ways to Cut Marketing Costs (If You Must) Without Losing Value
- How to Build a Content Marketing Strategy from Scratch
- How Much Should Your Company Spend on Video Advertising
- Why Do I Need a Video?
- Video Marketing Strategy: The Ultimate Guide
- Getting Your Team on Board with Video
- How Do Videos Perform Versus Other Types of Content