This article was published on May 12, 2016

How to determine your social media marketing budget

How to determine your social media marketing budget
Nick Rojas
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Nick Rojas

According to a study by the Duke University Fuqua School of Business, companies are rapidly increasing their social marketing budgets, even as they struggle to demonstrate the impact their efforts are having on their businesses.

The study revealed that the average business spends 9.4 percent of its marketing budget on social media. That number is expected to grow to 13.2 percent over the next year, and to 21.4 percent over the next five years. That’s an increase of 128 percent based on little more than the perception by chief marketing officers that social marketing presents bold opportunities.

Just 15 percent of CMOs believe they can demonstrate ROI or other quantifiable impact.

So, as every marketing dollar is a critical resource, how do businesses determine what to spend on social?

Determining your overall marketing budget

Your social media marketing budget will obviously be carved out of your overall marketing budget.

Boilerplate articles on LinkedIn offer technically true, yet non-actionable advice, like “Your marketing budget may depend on the size of your business, how long you’ve been up and running, what kind of expenses you have, and how well profits are going. Your budget will also depend on needs.”

social media

These vague generalities ignore the fact that discernable patterns do exist. Research shows that businesses that earn more than $25 million in annual revenue spend an average of 9 percent of that revenue on marketing. Those that earn less than $25 million generally spend an average of 11 percent of revenue on marketing.

This has led to 10 percent being enshrined as the “magic number.” But a more granular examination reveals the existence of other variables when it comes to the percentage of revenue businesses dedicate to marketing:

  • B2B product businesses spend 10.6 percent.
  • B2B service businesses spend 10.1 percent.
  • B2C product businesses spend 16.3 percent.
  • B2C service businesses spend 10.9 percent.

This data suggests that, with the exception of B2C product businesses, 10 percent of total annual revenue — or something close to it — is the most commonly encountered marketing budget, if not the magic number.

The high cost of social marketing

So the question becomes, how much of that 10 percent (or seven percent for Apple, 18 percent for Microsoft, 43 percent for Twitter) should be dedicated solely to social media marketing?


An analysis by the Content Factory reveals that the average business spends between $4,000 and $7,000 a month on social marketing — that’s $200 to $350 a day.

If that sounds high, that’s because it is.

As demand increases (as revealed in the Duke study), naturally, so does cost.

The study shows that creating a new Twitter account from scratch costs an average of $2,000-$4,000 a month. To restructure an existing Twitter account, businesses pay an average of $1,000 and $2,500 per month. PR agencies charge an average of $2,500 and $5,000 a month to set up and run a Facebook marketing account.

Creating a social strategy with at least two social networks costs an average of $4,000-$7,000. An audit of existing accounts with included coaching costs, on average, between $2,000 and $10,000.

How you spend determines what you spend

Those numbers are obviously out of reach for many small businesses — especially considering that those prices don’t even include the cost of content. Yet creating a truly effective and comprehensive social media presence is so incredibly specialized, tedious and time consuming that most business owners can’t shoulder the burden.

Some of the tasks involved include managing pages (generally seven to 10 tweets and two to three Facebook posts a day), writing and editing multiple blog posts a week (at least one weekly blog post), gaining relevant followers, and keyword monitoring and hashtag alerts.

Companies with a budget for paid ads must also work on ad creatives, ad optimization, analytics and measurements, and much more.

Social Media
Credit: Shutterstock

This leaves businesses with five options, each of which comes with its own pros, cons and price range.

Hire an intern and/or train existing staff (free or very cheap)

The drawback is that your social media presence will be entrusted to a non-specialist with limited experience who will likely require a time-taxing amount of oversight and guidance.

You’ll gain “hands on deck” – but are those hands qualified? Are they likely/liable to make mistakes?

Only consider this option if you really don’t have a budget or resources to use for social media marketing.

Hire a freelancer ($900/month)

Although experienced freelancers generally cost less (they average $45 an hour) than full-time employees, they are not necessarily loyal to your company and you are totally reliant on a single individual.

On the plus side, you don’t have to offer them benefits or pay payroll taxes for their services.

Hire a full-time, professional employee ($3,200/month)

The average social media manager earns between $35,000 and $50,000 a year, and they generally expect retirement and health benefits.

social media apps

The upside is that the business owner can control their schedule and their workflow without a significant time investment in training or oversight.

Hire a small marketing firm ($400-$1,500/month)

Small marketing firms cater mostly to small businesses. They generally have many flexible price options and their services can often be written off come tax time.

Like freelancers, they don’t require benefits or payroll, and they provide the added benefit of not relying on the talents or loyalties of a single person.

They cost far less than hiring an in-house manager, but is critical to research the firm to ensure they are not simply farming the work out to freelancers and pocketing the difference.

Hire a corporate marketing agency ($20,000 a year min.)

Feasible for only the largest and most well-resourced companies, these agencies employe large staffs, which develop and implement comprehensive, sophisticated, long-term social media campaigns.

There is no hard-and-fast rule regarding how much to spend on social media.

Buffer Social developed a good exercise, which encourages readers to divide up an imaginary $100 between the different components of a healthy social campaign to identify priorities.

Although the service you choose depends on what you can afford, keep in mind that budget is not the sole determining factor of what you should spend. Apple, the largest company in the world, dedicates just seven percent of revenue to its entire marketing budget — and just a sliver of that to social media.

Image credit: Shutterstock

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