Marketing Budget vs. Allowable Marketing Expense

Aug 15, 2022
Joseph Baker Marketing Expense

Figuring out how much to spend on your marketing efforts can be a bit confusing at times. 

Some will say marketing should account for 10-15% of your overall budget. Others would say it should be closer to 5%. Still others spend nothing at all.

How much should your marketing budget be?

Well, this begs a preemptive question: What is the lifetime value of your customer? 

When you consider how much your typical customer will spend over the course of their engagement with you, you will begin to have a much better understanding of how much you can afford to spend to acquire them. 

For example, let's say you say cosmetic products. 

You've assessed that your average customer spends $250 with you over the course of 2 years.

Your total costs to fulfill these orders are $80. 

Your profit margin over the lifetime of your customer is $170.

Here's the question: What is an allowable marketing expense in order to acquire that $170?

Would you part with $20? $40? Even $100 if it would scale?

Figuring out your allowable marketing expense will help start marketing proactively so you can acquire new customers and scale your business.