4 Factors To Determine Your 2025 Marketing Budget

Q3 and Q4 are notoriously busy times for businesses, forcing leaders to juggle a range of different priorities. From measuring performance and revenue goals to planning for the year ahead and setting budgets, there’s a lot to manage. In particular, most businesses are looking ahead to their budgets for 2025, particularly around how much they plan to spend on marketing.

While the average marketing budget in the U.S. increased to 9.1% of annual revenue in 2023, it dropped to 7.7% in 2024, signaling a 15% reduction year over year. For companies working with tighter budgets, it’s more important than ever to invest strategically so that your marketing dollars work as efficiently as possible.

While we can probably all agree that setting an appropriate annual marketing budget is an important part of reaching your business performance goals, there’s no exact science out there to help you nail down what that number should be. To complicate things further, there are a myriad of factors that should be considered and those can change depending on the industry, company, and market.

When we work with our clients on their annual planning for where to spend their marketing dollars, we typically weigh 4 key factors, which we’ll discuss below.

Factor 1: Marketplace Trends

The first thing we’ll typically look at is what trends are happening that are specific to our client’s industry, as well as in the broader economic landscape. Depending on your situation, some trends might indicate opportunities for major growth, while others could indicate the need to keep year-over-year spending flat.

Similarly, it’s important to scan the competitive landscape and see what other companies in their space are up to. There could be opportunities to gain market share if you can identify a gap in the marketplace where your potential customers aren’t being served by your competitors. This could justify ramping up spend in specific areas to get new customers and drive revenue.

Factor 2: Growth Goals

Since you’re already likely to be planning your revenue targets for 2025, it’s also a great time to think about how those growth goals are going to impact your marketing spend. If you plan to introduce any new products or services in the coming year, it’s especially important to make sure you’ve set aside enough resources to promote them.

Even more straightforward is whether you are planning for aggressive sales goals or revenue growth. Organizations with a sales enablement strategy achieve a 49% greater win rate on forecasted deals, meaning that it’s almost always a good idea to support your sales teams with relevant, customer-centric content. Be sure to plan for the time and money to research, write, and design/film this content, so that your sales teams can have a greater chance of success.

Factor 3: Target Audience

Just as you’ll need to talk to your sales team to get their insights on what can help support their efforts, you also need to know as much as you can about your target audience if you want to plan your marketing budget correctly. This is especially important if you plan to expand to target a new audience with your marketing materials.

Plan to spend resources on market research, which could range from focus groups and in-person interviews to deep dives into online forums. Understanding new market segments also means getting a grip on where your prospects hang out (both in person and online), which can have a major impact on content creation, ad spend, and more.

Factor 4: Marketing Channels

As you probably know by now, which platforms you use can affect your marketing budget in a big way. For starters, the cost of advertising itself can vary quite a bit from one platform to another. Likewise, you’ll want to revisit which channels you’ve had success with in the past (and which ones didn’t go so well) to assess where your paid ad spend should go in the coming year.

If you’re considering expanding into other marketing channels, the other major factor to consider is the cost of production. Making long-form content on YouTube, for example, typically costs a lot more than spinning up a blog post. Equipment, filming and editing costs, and (in some cases) keeping up with the comments section can take a lot of resources to keep going over the long haul. Likewise, the length and frequency of your planned campaigns will be a major consideration as you plan your marketing budget.

In A Nutshell

Increase your budget when you are:

• Planning for aggressive sales or growth goals

• Introducing new products or services

• Targeting a new market or segment

• Working in a competitive industry/market

Keep your budget flat when you are:

• Finding success with your marketing strategy and duplicating what was done previously (with a few smart optimizations, I hope!)

• Aiming to just maintain sales

• Facing supply chain or product shortage issues

If you’re limited in how much budget you can allocate to marketing…

You’re not totally out of luck. Start by making a list of things you can do vs. outsource (all of which should help you reach your goals while saving valuable dollars).

See the table below for an example: