The Golden Question: How Much do I Spend on Marketing?

WRITTEN BY: CAROLINE REEKIE

A Guide to DTC Start-Up Marketing Spend Allocation

Setting a considered marketing budget is a game changer for DTC whether a new startup or a growing scale up.  Gone are the days of marketing spend being the sidelined ‘nice to have’ of the past with its evolution through DTC making it your sales team, shop front, consumer path and most importantly your key to revenue.  The question most DTC start ups ask – How much do i need to spend to be successful in DTC? The answer is not a ‘one size fits all’ number.  It’s a balance of strategic planning, considered allocation and being consistently fluid to change to ensure every dollar spent fuels growth and adds real value. This guide will cover the essential considerations and industry benchmarks to setting your DTC marketing spend. 

Why a Marketing Budget Matters

Marketing is the heartbeat of your business! It drives awareness, generates leads, and ignites growth. Without a clear budget, your efforts can go off track, whether over spending sends you to the red or your underspending leaves you stagnant or with underwhelming growth. A well-defined marketing budget allows you to allocate resources wisely, measure performance, and pivot strategies when necessary. Let’s break the process down into easy-to-follow steps.

Step 1: Assess Your Financial Health and Business Goals

Evaluate Your Financial Status

Start by taking a close look at your finances. Understand your revenue streams, profit margins, and operating costs. This will give you a solid foundation for determining how much you can comfortably allocate to marketing without putting your finances at risk.  The P&L is no longer a tool for finance alone but an integral part for all stakeholders to understand and track to remain informed and aligned to the business goals. 

Define Your Business Goals

What are you aiming for? Whether it’s boosting brand awareness, generating leads, increasing sales, or venturing into new markets, your goals will shape your marketing spend.

• Tip: Want to expand internationally? Avoid generalizing to continents and focus on specific countries, cities and communities you want to connect to.  DTC can be an expensive exercise if your scope and goals are too broad. 

Step 2: Research Industry Benchmarks and Marketing Costs

Understand Industry Standards

Check out what others in your industry typically spend on marketing. The U.S. Small Business Administration suggests small businesses allocate about 7-8% of their revenue for marketing, but this can vary based on your sector and growth stage.  I prefer to lean heavier on spend for DTC start ups favoring a 10-30% reinvestment into marketing where possible to maximize on awareness and market penetration. 

Analyze Marketing Costs

Different marketing strategies come with different price points. For instance, digital marketing channels like social media, email campaigns, and content creation often offer more cost-effective options compared to traditional advertising methods like TV, OOH or print. Knowing these costs helps you make smart, informed decisions.

Example: A digital campaign might include expenses for social media ads, SEO tools (like SEMRush and ScreamingFrog), email marketing platforms (i.e. Klayvio, Bloomreach), and content creation services.Tip: Don’t underestimate the power of organic social media – too often this is used as a static image drop rather than an opportunity to have a meaningful and engaging conversation with your consumer but also can be leveraged for traffic and deliver revenue with the right strategist driving the approach.

• Tip: Don’t underestimate the power of organic social media – too often this is used as a static image drop rather than an opportunity to have a meaningful and engaging conversation with your consumer but also can be leveraged for traffic and deliver revenue with the right strategist driving the approach.

Step 3: Allocate Your Budget Wisely

Prioritize Your Marketing Channels

Identify which channels resonate best with your audience and align with your goals. Here are some popular options:

• Digital Advertising: SEM, PPC, social media ads
• Content Marketing: Blogging, video creation, educational materials
• Email Marketing: Automation tools, design, list management
• Influencer Marketing: Collaborations with micro and macro-influencers
• Affiliate Marketing: Commissions and network management
• Retargeting: Ads aimed at converting interested shoppers
• Public Relations/Events: PR agency fees, trade show costs

Tip: Small budget? Focus on organic channel optimisation, leveraging your email marketing channel (experiment with different formats and offerings in your welcome sign up pop up!), driving engagement on organic social and exploring affiliate marketing where you can operate on commissions basis. 

Spread Your Budget

Distribute your budget across these channels based on their importance, your affordability and expected returns. Here’s a sample allocation for a startup that can be used as a bench 

• Digital Advertising: 30-40%
• Content Marketing: 20-25%
• Email Marketing: 15-20%
• Influencer Marketing: 10-15%
• Affiliate Marketing: 5-10%
• Retargeting: 5-10%
• Offline Marketing eg. Events: 5-10%

• Tip: Stay Nimble! Be ready to adjust funds based on channel performance.  The above is not a set split but more of an initial starting point.  Your business will have its own unique learnings, needs and adjustments to consider.

• Tip: Stay Nimble! Be ready to adjust funds based on channel performance.  The above is not a set split but more of an initial starting point.  Your business will have its own unique learnings, needs and adjustments to consider.

Step 4: Monitor and Evaluate Your Marketing Effectiveness

Track Key Metrics

Keep a close eye on key performance indicators (KPIs) like conversion rates, customer acquisition costs, and ROI. Use analytics tools to gather data and assess how your campaigns are performing.  Data led decision making is the lifeblood of DTC so becoming comfortable with data informing all parts of your business is key to your success. 

• Tip: Often data can feel intimidating with endless rules, reports, tools and technologies flooding the market.  I would suggest finding a hands-on data partner who can collect all data points, interpret and advise as a true partner to growing your business.  

My recommendation? Check out Tap in Digital who offer a hands on data partnership with ability to capture the data from both your online and offline marketing activities while delivering you tangible actions and advice. 

Adjust Strategies as Necessary

The marketing landscape is always shifting, so it’s crucial to innovate and test new ideas. If a channel is delivering fantastic ROI, consider increasing its budget. Conversely, scale back on channels that aren’t hitting the mark.

• Tip: DTC marketing does not have a destination (for anyone!) – there will be no point that your learning stops, or the need to assess and adapt is no longer needed.  Understanding this and embracing this approach will be the key to success. 

Conclusion: Stay Flexible and Data-Driven

Setting a marketing budget isn’t a one-time task; it’s an evolving process. Regularly review your financial health, business objectives, and marketing performance to make necessary adjustments. Remember, flexibility and data-driven decisions are key to maximizing your marketing ROI.

Ready to supercharge your marketing strategy? Book a call today for personalized advice and start optimizing your budget for success!