Heads up: We refresh this post every year to make sure we include the most up-to-date information about marketing budget breakdowns.
You know you need to dedicate at least some of your budget and time to marketing. But what percentage of your revenue should you set aside? And what marketing tactics should you prioritize?
These are loaded questions! And we wanted answers. So we researched a handful of large and mid-sized companies across a range of industries to see how their marketing budgets break down and what ROI they typically see.
The ROI from a Healthy Marketing Budget
Businesses large and small understand the important of prioritizing their marketing budgets.
In recent years, companies like MindBody, Salesforce, Bottomline Technologies, Tableau and Oracle dedicated more than 20% of their revenue to marketing — some even spent close to 50%!
And what do all of these companies have in common? They grew their revenue year-over-year.
Without marketing, a company gets very little, if any, promotion or exposure meaning the chances of growth are slim to none. This is a well-known fact among marketers, evident in the amount of dollars successful corporations allocate toward sales and marketing every year.
Ten percent — this is the magic number you will likely hear whenever you ask how much of your revenue you should spend on marketing. But is that true for everyone? What about a company in its growth phase vs. a well-established brand like Apple?
As budgets continue to climb, many companies — especially those with more than $5 billion in revenue — are abandoning the 10% rule in favor of bigger budgets, with a heavy focus on digital marketing.
According to a recent Gartner Research study:
“The largest companies…those with more than $10 billion in annual revenue — have the largest appetite for digital advertising, averaging 11.6% of the marketing budget,” while those “with annual revenues of $500 million to $1 billion allocated 8.5% of their marketing budget to digital advertising.”
Of course, these figures vary wildly when you drill down into each industry. Deloitte found the following averages:
Marketing is responsible for leading revenue growth at 38.4% of companies. And while the 10% number may be right for some businesses, it’s not a one-size-fits-all figure.
While averages help set the playing field, we wanted to know what actual, individual companies were spending, from the small guys to the big kahunas.
So, we set out to do something that no writer ever wants to do: math. Here’s what we discovered about marketing budgets, broken down by industry.
Salesforce, MindBody and Tableau are in the business of marketing and sales management software. Just take a look at their numbers:
Salesforce invests 46% of their revenue in sales and marketing. 46%! Think about that for a minute. That’s nearly half of their $10.5 billion in revenue generated in 2018.
What do they get in return for such a hefty investment? Growth! In 2018 Salesforce grew by 25% from the previous year.
What’s more, Salesforce has a 19.6% market share of the CRM industry, which is greater than some of the most well-known CRM providers — Microsoft, SAP and Oracle.
MindBody is a cloud-based business management software for the wellness services with a 2018 revenue of $228.9 million.
The company invested 39% of their revenue into sales and marketing, which resulted in 31% growth year-over-year.
Both MindBody and Salesforce far out-spent on marketing and sales compared to research and development (Salesforce spent 15% on R&D; MindBody spent 19.6% on R&D), a trend that is consistent across most industries, including pharmaceuticals, manufacturing and technology.
Tableau, a younger and smaller company that went public in 2013, has become one of the fastest-growing companies in the business analytics software field, thanks to high demand for visual analytics and a large investment in sales and marketing.
Tableau’s 2018 year-end financial statement shows their revenue almost tripling from $412.6 million in 2014 to $1.16 billion in 2018.
Here’s a quick breakdown of several SaaS companies:
- MindBody (FY 2017) – 39% of revenue invested in marketing, 31% revenue growth year-over-year
- Salesforce (FY 2018) – 46% of revenue invested in sales and marketing, 25% revenue growth year-over-year
- Tableau (FY 2018) – 51% of revenue invested in sales and marketing, 32% revenue growth year-over-year
- Manhattan Associates (FY 2018) – 8% of revenue invested in sales and marketing, 1.6% revenue decrease year-over-year
- Bottomline Technologies (FY 2018) – 21.8% of revenue invested in sales and marketing, 12.8% revenue growth year-over-year
One thing is clear here — 10% isn’t the magic number. At least for these software and marketing mavens, who are targeting growth and doing so very successfully thanks to their investment in showcasing the services they sell.
In the digital age, it’s no surprise that technology companies dominate Forbes’ list of the most powerful brands year after year.
Microsoft, Google, Apple and Intel are four successful, well-known, multinational companies. As monsters in their industry, they are established, have much higher revenue and are not looking for the same type of exposure as a smaller company might.
While they clearly have the revenue, do these established brands need to keep investing in marketing? The answer is yes — just not as aggressively.
As Horace Dediu, founder of independent research firm Asymco and a former Nokia business development manager said in a Reuters article:
“The stronger, more differentiated the product, the less it needs to be propped up by advertising.”
Here are the most recent tech numbers:
- Microsoft (FY 2018) – 15% of revenue invested in sales and marketing, 14% revenue growth year-over-year
- Google/Alphabet (FY 2018) – 11.9% of revenue invested in sales and marketing, 23% revenue growth year-over-year
- Oracle (FY 2018) – 22% of revenue invested in sales and marketing, 4.2% growth year-over-year
- Intel (FY 2017) – 11.9% of revenue invested in sales and marketing, 12.9% revenue growth year-over-year
Similar to the other industries examined, manufacturing companies are making significant investments in marketing and sales.
Here’s how it breaks down for the two manufacturers we examined:
- IDEXX Laboratories (FY 2018) – 17% of revenue spent on sales and marketing, 12% revenue growth year-over-year
- Johnson & Johnson (FY 2017) – 27.7% of revenue spent on sales, marketing and administrative, 6.7% revenue growth year-over-year
In the 2018 Cost of Recruiting an Undergraduate Student Report, higher education consulting group Ruffalo Noel Levitz reported that four-year private institutions spend a median of $2,357 per new student.
We looked at the numbers for a few publicly held education companies, including Grand Canyon University, a for-profit school; Strayer Education, an education holding company; and Bright Horizons, a child care and early education provider.
Note that each organization categorized marketing expenses differently.
- Grand Canyon University (FY 2018) – 13.9% spent on marketing, promotional and advertising, 13.2% revenue decrease year-over-year
- Strayer Education (FY 2017) – 18.2% of revenues spent on marketing, 3.1% revenue growth year-over-year
- Bright Horizons (FY 2018) – 10.2% spent on selling, general and administrative, 8.7% revenue growth year-over-year
Marketing Budget Breakdowns
Although the amount businesses spend may vary, how and where the money is being spent is pretty consistent across industries: digital marketing.
A CMO survey from Gartner found that 21% of marketing budgets are spent on advertising, with 2/3 being allocated to digital channels. A big part of this is content marketing, which includes blog posts, social media posts, case studies, eBooks, infographics and videos.
According to a recent B2B Content Marketing report:
- 62% of B2B marketers say that eBooks and white papers are the most successful types of content marketing.
- More than 70% of respondents agreed they can demonstrate, with metrics, how content marketing has increased audience engagement and their number of leads.
- The average percentage of total marketing budget spent on content marketing is 26% (among all respondents).
- The most successful spend 40%.
- The least successful spend 14%.
- 38% of all respondents expect their content marketing budget to increase in the next 12 months.
The amount each company spends differs according to a number of factors including business type, revenue and growth goals.
But the main message is clear: Unless you’re Apple, spending less than 10% of your revenue isn’t going to cut it.
In order to see revenue growth, companies need to invest heavily in the mechanism that promotes, sells and creates this growth. That mechanism is marketing.
How to Plan Your Marketing Budget
You can see from the different budgets across various industries that there’s no one-size-fits-all solution to how a marketing budget should break down.
To calculate how much your business should spend, you need to first identify your marketing goals. Does your website need an update? Are you looking to improve the quality of leads coming in through your contact forms? We recommend writing a marketing plan so that you have a living document to work off of.
From there, you can evaluate what kind of a budget your company can work with.
If you need help defining your budget and establishing a marketing strategy that drives growth, give us a shout!
All the data in this report has been rounded to the nearest whole number and derived from 2017 annual reports (if 2017 data was not available we used the 2016 10-K data).
Mindbody 2016 Annual Report:
Salesforce 2017 Annual Report:
Tableau 2016 Annual Report:
Manhattan Associates 2016 Annual Report:
Bottomline Technologies 2017 Annual Report: https://www.bottomline.com/application/files/5115/0764/8891/2017-Annual-Report.pdf
Microsoft 2017 Annual Report:
Google 2016 Annual report:
Apple 2017 Annual Report:
Intel 2016 Annual Report:
Oracle 2017 Annual Report:
IDEXX Laboratories 2016 Annual Report:
Johnson & Johnson 2016 Annual Report:
Grand Canyon University 2016 Annual Report:
Strayer Education 2016 Annual Report:
Bright Horizons 2016 Annual Report: