How to Set a Marketing Budget and Measure Your ROI


It’s 2020 and by now, if you’re not setting aside 5%-8% of your total revenue for your marketing budget and measuring your ROI, you may be behind the times. We’re surprised to find out that many small to mid-sized businesses still treat marketing, ROI, and having an up-to-date, properly SEO’d website as an afterthought. 

As part of our commitment to building sustainable brands, we’d like to address the importance of having a marketing budget and measuring your marketing ROI.

The Importance of a Marketing Budget

The Importance of a Marketing Budget

People will work on their corporate identity, but not plan for the marketing budget to implement it. While it’s essential to have an initial budget for developing your logo, website, and marketing materials, it’s also crucial that you have an ongoing plan for how you are going to get the word out and a budget for putting your marketing plan into action.

The best way to do this is to create a marketing strategy and set a monthly or yearly marketing budget to make sure it happens. A marketing budget is a guide that will ensure you are staying on target with your estimated costs vs. the actual costs.

We’ve all heard the phrase “You have to spend money to make money.” However many companies choose to underspend on marketing, thinking that by not spending you’re saving. 

By that logic, you’re missing out on an enormous amount of business.

What does a marketing budget include?

Your marketing budget should include all of the prices that you expect to pay for services and advertising. This includes graphic design, printed materials, website development, and ongoing reputation management. It would also include radio and commercials, trade shows, advertisements in newspapers and other publications, mailings, etc.

What should your marketing budget be?

The amount of money to budget for marketing varies greatly by industry and business size. The influential business financial planning sites, and, both agree that your marketing budget should be between 5% – 8% of your total revenue, depending on whether you want to maintain your market position or gain a greater market share.

Use these guidelines.

These guidelines should be considered when setting your marketing budget.

  • First, consider any development or refinement of your current branding. Is your image up to par? Do you have a professional logo, website, and marketing materials in place that represent you as a credible company? Is there consistency in the look and feel of your materials? If not, what needs to be revamped? Consult with an agency if you’re having trouble determining the current effectiveness of your brand.
  • Second, what are the ongoing expenses of advertising, maintaining and promoting your brand to your target audience? If you stop advertising, they will forget you. If you don’t keep your website and materials up to date, you will lose credibility and rankings with the search engines. What is your plan for keeping your company visible and what will it cost?
  • You can visit the Small Business Administration ( for more guidelines and information. They have charts that compare revenue with ideal marketing budget percentages. They also list variables that should be considered.

Marketing is a fundamental ingredient for business growth and profitability. Many companies fail simply because they do not allocate enough money for marketing. When done properly, marketing brings back solid returns.

Next, we’ll talk about how your marketing budget and measuring your ROI are important aspects of running any business.

Marketing Campaigns are Investments In Your Company

As with any investment, marketing campaigns need to be monitored, measured, and compared to other investments to ensure you are spending your money wisely.

First, what is ROI?

ROI (Return On Investment) is a measure of the profit that results from each investment. Simply put, it’s the percentage of profit you earn after you subtract what you spent on the investment.

How to calculate ROI

Return on investment is calculated as a percentage. In other words, it’s the percentage of the profit you earn after you subtract out what you spent on the investment. Written out, the formula looks like this:

ROI % = (Net Return on Investment / Cost of Investment) x 100

When it comes to marketing, figuring your ROI can be complicated. There are many variables on both the profit side and the investment side. However, understanding how to calculate your ROI is critical to producing the best possible results with your marketing investments. By knowing how to calculate your ROI, you can focus on investing in campaigns that deliver the best results. If you find that one campaign only yields a 10% ROI while another generates 50%, you’ll be able to quickly determine where to focus your budget.

This is helpful because marketing does not deliver profits in the same manner as direct sales do. So it can be hard to understand just how your marketing is working for your business or your company. 

Because of the indirect profits and ROI, companies often cut back or eliminate their marketing budget during tough times. That can be a dangerous decision since marketing is an investment to produce revenue. As we stated earlier, to continuously generate sales, you need an ongoing marketing plan to get the word out.

By determining return on investment, you can help your company move away from the idea that marketing is an unnecessary expense that can be cut when times get tough. Monitoring your ROI will justify your marketing investments.

Tracking your ROI

You have three options when tracking your ROI:

  1. Ignore ROI tracking
  2. Calculate some of your ROI
  3. Measure and track all of your investments

Ignoring your ROI tracking means your company will not know what works and what doesn’t. If you track some of your ROI, you’ll have a general idea of how your marketing dollars are working for you, but you won’t know the exact percentage of profit you are generating from your campaigns. Following these two practices are where you could make the mistake of cutting your marketing budget in tough times.

In the ideal situation, you measure and track all of your marketing campaigns and you know what ROI each campaign is generating. With this model, your company understands and supports the ongoing marketing investment you make because there is solid data to support the investment and identify the return.

Marketing Budget and ROI

How to measure your ROI

You’re in business to make a profit, right? That’s why it’s a good idea to measure the ROI on all of your marketing investments. Think about your sales process. Is it short and direct? If so, that means calculating your ROI will be simple.  If your sales process is long and complex, you may choose to modify it to make your ROI calculations simpler.

Establish your metrics

There are several figures you’ll need to calculate your ROI:

  • COGS (Cost Of Goods Sold): the cost to produce a product or service. This includes costs of materials, vendors, and subcontractors that go into physically producing the product or service.
  • Marketing investment/cost: this includes the cost of media. For example, the cost to place an advertisement on Google Ads or social networks or the production cost to run a commercial.
  • Revenue: This is the income from the sales generated from the campaign. It can be tricky to tie revenue to a specific campaign, especially when you run a variety of campaigns and/or have a long sales process. There are ways to simplify this, for example, having a specific landing page on your website that tracks visitors for each campaign. There are also many tools available that will help to track your conversions from the moment a visitor sees or finds you until the moment they become a customer, allowing you to see their entire customer journey.

Set an ROI goal

Set an ROI goal for your individual campaigns and your entire budget. Your business type, metrics, and industry will determine what the ideal ROI for your marketing investments will be. As the investment site, tells us, “Any positive number can be considered a ‘good’ return on investment.”

Setting an ROI goal will give you more power over your budget and provide you a way to measure and compare results. You should determine a threshold and floor for each marketing campaign. Only run a campaign if you project that it will hit the threshold. If your projections show that the campaign won’t hit your threshold, cut the campaign and put your money elsewhere.

Improve your ROI

By developing and committing to a managed tracking and reporting process you can build solid measurements, even if you have a complicated sales process. Do your best to estimate figures, if needed. The trick is keeping consistent in tracking, monitoring, and evaluating your campaigns. 

ROI strategy is a process. Use your ROI formula to continually test new ways to improve your campaigns; then focus on investing your money in the campaigns that produce the greatest return for your company.

The more you understand ROI, the more control you have over your marketing investments. By continually studying and improving your reporting capabilities, you will be able to use ROI to improve your campaigns and to generate more profit for your company.

Follow Empire Creative Marketing on LinkedIn, Instagram @empirecreative, and on Facebook for more branding and marketing strategy tips. If you’d like to put your business at the forefront of your industry, contact us today for a brand assessment.

Empire Creative Marketing is a full-service branding agency located in Houston, Texas. Through strategic marketing on the web, video, and print, our team of dedicated professionals will ensure your brand success. For more information, visit our website today.



Digital Marketing Specialist

Deven is a talented copywriter and content developer who loves to become a subject matter expert and then share his knowledge with the world.