It is not uncommon for a prospective advertiser to come to us with their goals and then ask “what is that going to cost”? While an understandable question it does not take into consideration a number of factors used in developing a media plan. Various tactics have different price points and achieve different objectives. How they are used is impacted by goals and budget. In planning it is always budget before tactics.
If you have ever bought a home, you know that before the realtor gets you in a car, they want to understand your finances. The realtor wants to know what your budget is and how you arrived at that number. Some even want a pre-qualification from a bank. There is no point in looking at houses you can’t afford. And there is no point at looking at media plans you can’t execute.
How Much Should You Spend on Advertising?
There are several ways to establish an advertising budget. Each provides a different perspective.
Industry Benchmarks
Start by examining what businesses in your industry typically spend on marketing and advertising. According to Gartner’s 2025 CMO Spend Survey, marketing budgets averaged 7.7% of company revenue. However, this survey primarily covered large companies with annual revenues exceeding $1 billion. Therefore, that percentage may not be appropriate for a smaller business or emerging brand. Benchmarks provide useful guidance. However, they should never replace an analysis of your own business needs.
Percentage of Revenue
Another approach is to allocate a fixed percentage of annual revenue to marketing. For example, a company generating $5 million might allocate 8%, or $400,000, to marketing. Remember, marketing includes more than advertising. Creative development, research, salaries, and other expenses may consume part of that budget. Also, a growing company may need to invest more aggressively than an established business.
Previous Advertising Spending
Your advertising history provides another starting point. Look at what you spent and what that investment produced. How many leads, customers, or sales resulted? Then ask if those results met your objectives.
A campaign may have performed poorly because it lacked sufficient funding. Alternatively, the media strategy may have been ineffective. Simply repeating last year’s budget ignores changes in competition, media costs, and business objectives.
Business Goals
This is often the most useful approach. Start with the number of customers or sales you need. Then work backward to determine the required investment.
For example, suppose you need 100 new customers. If 10% of qualified leads become customers, you need 1,000 leads. At an estimated $50 per lead, that requires $50,000 in advertising. Of course, these assumptions must reflect actual performance and market conditions. The important point is connecting your advertising budget to a measurable business objective.
Why Your Budget Determines Your Media Plan
A $50,000 advertising budget requires a different strategy than a $500,000 budget. Both businesses may have the same goals. However, they cannot pursue those goals using identical media plans. Your budget determines how many people you can reach and how often they see your advertising. It also influences which markets you can cover and how long your campaign can run.
Consider a personal injury law firm looking to advertise across New York City. A limited budget might support a focused campaign in one borough. A larger budget could support broader coverage across multiple boroughs. The available money also determines whether several media channels can work together effectively.
Reach and frequency are especially important. Reach measures how many different people see your advertising. Frequency measures how often they see it. Without sufficient budget, you may reach too few people or don’t get the frequency necessary for success. Therefore, even a well-meaning advertising campaign can fail to generate meaningful results.
A media plan must balance these factors against available resources. Without a budget, you have a list of possibilities rather than an executable plan.
Allocate Your Budget Before Choosing Media Channels
Once you establish your budget, the next step is deciding how to allocate it. This is where media planning strategy starts. Before selecting television, connected TV, paid search, or social media, consider three questions. What business goal must your advertising accomplish? Where is the greatest opportunity in your sales funnel? What can you afford to pay for each result?
These answers should guide how much money goes toward awareness, engagement, and conversion.
The Three Stages of Budget Allocation
Awareness: Reaching Potential Customers. Awareness introduces your business to people who may need your products or services. These consumers may not be ready to buy today. However, you want them to recognize your business when that need develops. Therefore, awareness campaigns focus on reaching qualified audiences with enough frequency to make an impression. Important metrics to consider include reach, frequency, and cost per thousand impressions (CPM).
Engagement: Building Interest. Engagement moves consumers from awareness toward consideration. They may visit your website, research your products, or compare your business with competitors. Advertising at this stage encourages consumers to learn more and take the next step. Retargeting can help reconnect with people who have already shown interest. Useful numbers include qualified website traffic, engaged visits, and cost per engagement.
Conversion: Generating Leads and Sales. Conversion advertising focuses on people who are ready to take action. The objective may be generating a phone call, appointment, qualified lead, or purchase. Therefore, performance measurements include cost per lead, customer acquisition cost, and return on advertising spend.
Remember, conversion advertising often depends on demand that already exists. If too few people know your business, conversion campaigns may have limited opportunities to produce results.
There is no universal formula for dividing your budget among these three stages. If you are a “challenger brand”, relatively unknown, you will need more awareness. Brands that have a long sales cycle or need research want to increase engagement. Better known brands with easily understood value propositions can put more emphasis on conversions.
The right allocation depends on your business, competitive environment, and current position in the market. And it is impossible to start this process unless you put budget before tactics.
Work Backward From Your Cost Per Result
Your budget should reflect what you can afford to pay for a new customer. Suppose your target is 200 qualified leads. Your expected cost per lead is $75. That creates a projected advertising requirement of $15,000. However, generating leads is only part of the equation.
If 20% become customers, those 200 leads produce 40 customers. Your advertising cost per customer becomes $375. Is that profitable? The answer depends on your margins, lifetime customer value, and other acquisition expenses. If the numbers don’t work, you need to reconsider your budget, goals, or assumptions. This analysis should happen before you spend money, not after.
Research On Advertising Budgets
Industry research supports the importance of establishing a realistic budget. Gartner’s 2025 survey found that paid media accounted for 30.6% of total marketing budgets. That equals approximately 2.4% of company revenue. Additionally, 59% of surveyed marketing leaders reported insufficient budgets to execute their strategies.
These findings highlight the difference between planning what you want and paying for what you can accomplish. And again, these numbers come from large to enterprise businesses. SMB’s may operate quite differently.
Research also emphasizes balancing long-term brand building with short-term sales activation. Research suggests a roughly 60/40 allocation between those objectives for many consumer brands. However, these figures are benchmarks, not rules. Your allocation should reflect your specific market and business goals.
What Happens When Your Budget Isn’t Enough?
Sometimes your available budget cannot support your business objectives. When that happens, something must change. You might narrow your geographic coverage or concentrate on a smaller audience. Alternatively, you could extend the campaign timeline or focus on fewer objectives.
For example, concentrating your advertising in one market may produce better results than spreading it across five. The worst decision is often trying to do everything with too little money. A campaign that lacks sufficient reach or frequency may never gain traction. Therefore, your Advertising Agency should explain what your budget can accomplish and where adjustments are necessary.
Now Choose Your Media Tactics
Only after establishing and allocating your budget should you begin selecting advertising channels. Now you can compare the available options against your objectives. You can evaluate television, connected TV, paid search, social media, and other platforms. Each offers different audience capabilities, costs, and potential results.
Your media planner should examine actual buying costs, not simply rely on industry averages. Then determine the reach, frequency, and response each option can reasonably deliver. The objective is not to use as many channels as possible. Instead, select the combination that best supports your goals within your budget.
Budget Before Tactics
Effective media planning starts with understanding what you want to accomplish and what you can invest. From there, determine how much funding each stage of your sales funnel requires.
Next, establish realistic performance targets and evaluate whether your budget can support them. Finally, choose the media tactics that offer the best opportunity to achieve those results.
The question isn’t where you want to advertise. It’s what you need to accomplish and what you’re prepared to invest. Hence, budget before tactics.
