Ah, social media. Right now, millions of people around the world are retweeting, pinning, posting, ‘gramming, and liking. In fact, there are 2.89 billion active social media users worldwide.
It’s no wonder, then, that websites like Facebook and Twitter have become powerful marketing weapons. Companies like yours use these platforms to target clients, move prospects through sales and marketing pipelines, and increase revenue.
Let’s face it, social media is the most powerful marketing method today.
But how much should you really spend on social media? How much should you negotiate when you contact an agency? By the end of this post, you’re going to find out the truth about social media marketing cost.
Before we can answer this question, though, we need to find out how much organizations spend on marketing as a whole…
How Much Do Organizations Spend on Marketing?
This is the million-dollar question. The truth is, it all depends.
Generally, marketing spend depends on various factors:
- The size of the company (number of employees).
- The industry sector.
- The type of marketing (SEO, social media, trade shows, print, etc.).
The most authoritative source on this topic is probably research undertaken by Growth Marketing Stage (GMS). They gathered a wide range of insights into marketing budgets, trends, and the effectiveness of marketing channels.
Perhaps the most interesting insight was the correlation between marketing spend and the size of a company. Interestingly, the bigger the company, the less they spend on marketing.
This might make sense to you. After all, a huge international company like McDonald’s or Coca-Cola has global name recognition and a loyal customer base. They might choose to spend less money on marketing than a startup.
Research from GMS reveals that:
- Companies with 1-20 employees spent the most on marketing. They allocated, on average, 25 percent of revenue to marketing.
- Companies with 21-50 employees allocated 16 percent to marketing.
- Companies with 51-100 employees allocated 14 percent to marketing.
- Companies with 101-1,000 employees allocated 12 percent to marketing.
- Companies with more than 1,000 employees spent the least on marketing. They allocated, on average, 7 percent of revenue to marketing.
So, at this point, you’re probably thinking something like this:
“I run a company with 1-20 employees. I should allocate 25 percent of revenue to my marketing budget.”
“I work for a company with more than 1,000 employees. We should allocate 7 percent of revenue to our marketing budget.”
It doesn’t really work like this, and you’re going to see why…
Taking into Account Industry Sector and Marketing Type
A one-size-fits-all approach to marketing budgets won’t work. There are too many variables. Take different industry sectors, for example.
The research from GMS found the following:
- Organizations in the retail sector allocated 35 percent of revenue to their marketing budget.
- Organizations in the IT sector (product-based companies) allocated 29 percent of revenue to their marketing budget.
- Organizations in the IT sector (outsourcing companies) allocated 9 percent of revenue to their marketing budget.
- Organizations in the fast-moving consumer goods sector (FMCG) allocated 7 percent of revenue to their marketing budget.
As you can see, the amount of money allocated to marketing budgets depends on the industry, as much as the size of a company.
What about the type of marketing? This plays a huge role in determining marketing budgets, too.
The research from GMS found that organizations spend:
- 14 percent of their marketing budgets on trade shows and exhibitions.
- 12 percent on PPC.
- 11 percent on website design.
- 11 percent on growth marketing.
These are just the top four. GMS has broken down marketing budgets based on different marketing budgets in far more detail.
One important point to note here, though, is that organizations spend, on average, 17 percent of their marketing budgets on content marketing and social media combined. These two marketing methods are closely linked, so when you combine them together, you can see just how much organizations are spending on them.
In fact, organizations spend nearly one-fifth of their marketing budgets on content marketing and social media.
Why Combine Content Marketing and Social Media Marketing Spend?
Research from GMS reveals that companies allocate 8 percent of their budgets to social media marketing alone. This is less than trade shows and PPC, for example, but it doesn’t really paint the whole picture.
Few companies just have a social media marketing strategy. They will spend money on content marketing, too. This is why it’s important to consider both of these marketing methods when negotiating social media marketing cost with an agency.
Why is Content Marketing and Social Media Spend Important?
Content marketing and social media are two of the most important components of digital marketing. Research has shown, time and time again, that these two methods could provide you with a significant return on your marketing spend investment.
In a separate study, a huge 72 percent of marketers say that content marketing increases engagement. Plus, 72 percent say content marketing increases leads.
Then there’s social media. Most adults aged 18-34 follow at least one brand via a social network, while 71 percent of consumers who have a good experience with a brand on social media are likely to recommend that company to other people.
How Much Should You Spend on Social Media and Content Marketing?
Taking into account all of the above, let’s try and settle this for good.
Say a company makes $500,000 in revenue a year and employs 10 people. According to research from GMS, we can assume the company will allocate 25 percent of revenue to marketing (500k/25=125k). Again, according to GMS research, a company of this size will spend 17 percent of their marketing budget on social media and content marketing. This amounts to $21,250. Let’s round it down to $20,000.
So, a company making $500,000 a year in revenue and employs 10 people will spend around $20,000 a year on social media and content marketing.
(This doesn’t take into account the industry sector, which can also impact marketing spend.)
Here’s another example:
Say a retail company makes $500,000 a year in revenue. According to GMS research, retail companies allocate 35 percent of revenue to marketing. This amounts to $175,000. We know that, on average, companies spend 17 percent of their marketing budget on content and social media marketing. This amounts to $29,750. Let’s round it up to $30,000.
So, a retail company that makes $500,000 a year in revenue will spend around $30,000 on content and social media marketing.
(This doesn’t take into account the number of employees, which can also impact marketing spend.)
The Bottom Line
For most small companies, spending between $20,000-30,000 on social media and content marketing sounds about right. However, the exact amount you spend will depend on your company’s budget, goals, and individual circumstances.
You should remember these numbers, however, when you contact a social media agency. Then, you can negotiate a good social media marketing cost that will provide you with a return on your investment.
Jason is a 20+ year marketing veteran including time spent at Microsoft overseeing social media for Microsoft Advertising & Office for Mac. Once named to Forbes Power Social Media Influencers List, Jason is the owner and founder of Socialistics.