Start with what the business needs to achieve, then work out what marketing must do to help get it there.
Last week I wrote about [the marketing budget trap]([essay 5 link]): the habit of starting with last year’s spend, an industry benchmark or a number handed down by finance, and building the marketing plan around it.
The obvious question is what to do instead.
The answer is not to ignore financial constraints, historical spend or benchmarks. All of them matter. What changes is the order in which you use them.
A better marketing budget starts with the business objective and works back through the market, the customer and the role marketing needs to play. Only then do you ask what level of investment is required.
This is how I would approach it.
Start with the business objective
Before you think about channels, media, campaigns or the budget itself, get clear on what the business is trying to achieve.
“Grow revenue by 10%” is a start, but it is not enough. Where is that growth supposed to come from?
More customers in an existing market? More value from existing customers? A new product? A new geography? A different segment? Better retention? Higher prices? Share taken from competitors?
Those are different commercial objectives, and they create very different marketing requirements. A business expecting 10% growth from price increases across an established customer base does not need the same level or type of marketing investment as one expecting 10% growth from entering two new markets.
The first job is to turn the financial target into something commercially meaningful.
Business objective: grow revenue by 15% over the next 12 months.
The more useful question: where will the 15% come from?
Perhaps:
5% from existing customers buying more
4% from launching a new product
6% from acquiring customers in a new segment
Now you have something marketing can work with.
Understand what has to change in the market
Once you know where growth is meant to come from, ask what would need to change among customers for that growth to happen.
This is where budgeting starts to become strategy.
If growth depends on entering a new segment: how many potential buyers know the brand? Do they understand the proposition? Is there existing demand to capture, or does demand need to be created?
If the objective is growing an existing customer base: is awareness high but consideration weak? Is the real problem conversion? Retention? Product adoption? Pricing? Distribution?
Marketing cannot solve every business problem, and one of the most useful things a marketing team can do is identify where the constraint sits. More media will not fix poor distribution. A brand campaign cannot compensate indefinitely for a weak proposition.
The budget should be connected to the problem that needs solving.
Define marketing’s contribution to the objective
Next, be explicit about what marketing is expected to contribute.
This is where plans usually go vague. The business has a revenue target, marketing has a collection of activities, and there is an assumption that one will somehow produce the other.
Define the outcomes marketing can reasonably influence instead.
Entering a new market? Marketing may need to build awareness, establish credibility, create initial demand and hand sales a pipeline of qualified opportunities.
Growing share in an established category? The priority might be mental availability, penetration and sufficient share of voice against competitors.
Expanding within an existing customer base? The contribution could be product adoption, stronger cross-sell propositions and retention support.
This changes the planning conversation. Marketing is no longer budgeting for activity. It is budgeting for a role in a commercial outcome.
Work out what the strategy requires
Only now should you think seriously about the work that needs funding.
What does the strategy require to have a reasonable chance of success? That could be market research, customer insight, brand development, creative, content, media, events, partnerships, product marketing, customer marketing, technology, agency support or internal capability.
Do not begin with the existing list of activities and ask which ones fit inside the budget. Start with what the strategy needs.
Entering a market where awareness is close to zero? A small performance media budget may generate some leads, but it will do little to establish the brand at scale. The strategy might require broader reach, local research, creative adaptation and sustained investment. A category leader with strong awareness and distribution has a very different requirement.
Duration matters too. Marketing effects do not conveniently reset at the end of each financial year, and some objectives need sustained investment before the commercial return becomes visible.
A budget that can fund the first three months of a twelve-month strategy is not really funding the strategy.
Separate committed, core and strategic spend
Before you can defend a number, understand what parts of the cost base are actually flexible. Most marketing budgets contain three kinds of money.
Committed costs: contracts, technology platforms, sponsorships and retainers that cannot easily change in the short term.
Core operating costs: the people, tools and infrastructure needed to run the function.
Strategic investment: media, research, creative development, new market activity, experimentation and everything else directly connected to the growth plan.
The distinction matters because a headline budget can flatter the amount available for growth. A $10 million marketing budget sounds substantial. If $6 million is committed to people, technology and existing contracts, the real question is how well the remaining $4 million can support the strategy.
It also matters when finance asks for savings. Cutting 10% from the total does not mean cutting every area by 10%. Good budgeting requires choices about which investments matter most.
Build more than one investment scenario
Very few businesses fund every marketing recommendation in full. Rather than presenting one budget as the only possible answer, show the trade-offs. Three scenarios work well.
Minimum viable investment. The minimum required to participate credibly. Be careful with this one: minimum viable should not mean spreading a small budget thinly across everything the business would like to do. Sometimes it means doing fewer things properly.
Recommended investment. The level that gives the strategy a reasonable chance of delivering the objective. This is the budget the marketing team genuinely believes is right, supported by evidence and assumptions.
Accelerated investment. Where additional capital could create value if the business wanted to pursue the opportunity harder. This one is especially useful when the growth ambition itself is uncertain, because it shows leadership what more investment could unlock instead of presenting marketing as a fixed cost line.
Then explain what changes between the scenarios. If finance cuts the recommended budget by 20%, what goes? Reach? Frequency? Geographic coverage? Research? A product launch? Speed? Long-term brand activity?
Make the consequence visible. A smaller budget may be the right business decision. It should not be presented as though the expected outcome is unchanged.
Use benchmarks after you have built the plan
Now the benchmarks earn their place.
Once you have an investment recommendation, compare it with external evidence. Marketing spend as a percentage of revenue in similar organisations. Share of voice against share of market. Competitor investment. Previous effectiveness data. The economics of acquiring and retaining customers.
If your recommendation is well above the benchmark, investigate why. The plan may be overbuilt. The benchmark may not fit a business entering a new market. The growth target may be unusually aggressive. The company may have been underinvesting for years. If it is well below, ask the same questions.
The benchmark helps you challenge the recommendation. It should not become the recommendation.
Connect the budget to assumptions
Every marketing budget contains assumptions, written down or not. Make them explicit.
If the plan assumes a level of media investment will generate a particular amount of demand, document it. If the business expects marketing to enter a new market on the budget used to maintain an established one, make the implication visible. If a campaign relies on sales converting a certain percentage of qualified opportunities, include the dependency.
This matters most when marketing is held accountable for outcomes that depend on other parts of the business.
A strong budget does not promise certainty. It shows the logic connecting investment to the expected outcome, and names the things that need to be true for that outcome to happen.
Be clear about what marketing cannot guarantee
Marketers reach for benchmarks and precise ROI projections because organisations like certainty. Strategy rarely provides it.
A marketing budget is an investment decision built on evidence, assumptions and expected returns. It is not a vending machine where the business inserts $10 million and receives $30 million of revenue twelve months later.
The job is to reduce uncertainty, not pretend it does not exist. That means understanding historical performance, testing assumptions, modelling scenarios, using research, measuring results and adjusting investment as the evidence changes.
It also means saying so when the growth objective and the available investment do not match. That is an uncomfortable conversation, and a far more valuable contribution than delivering a plan everyone knows has been underfunded.
Revisit the budget during the year
A budget should not become fixed simply because the planning cycle has finished. Markets change. Competitors act. Campaigns over-deliver and under-deliver. Products slip. Sales capacity moves. AI creates new efficiencies.
A growth-oriented budget should be able to respond. That does not mean constantly moving money in reaction to short-term performance, which recreates the original problem with investment continually pulled towards whatever delivered the most immediate measurable return last month. It means knowing which assumptions should trigger a change.
An experiment producing much stronger returns than expected may deserve more investment. A product launch that moves six months should move its budget with it. If AI reduces production costs, decide whether the saving returns to the business or funds an underinvested growth opportunity.
The answer should come back to the strategy.
A simple way to structure the conversation
When I am thinking about a marketing budget, these are the questions I want answered.
What is the business trying to achieve? Be specific about the growth objective and where the growth is expected to come from.
What needs to change in the market? Understand the customer, category and competitive conditions behind the objective.
What role can marketing realistically play? Define outcomes, not activities.
What does the strategy require? Identify the capabilities, activity, investment and time needed to create those outcomes.
What level of investment gives the plan a credible chance of working? Build a recommendation instead of inheriting a number.
What happens if we spend less, or more? Make the trade-offs visible.
What evidence pressure-tests the recommendation? Historical performance, benchmarks, share of voice, unit economics and effectiveness research.
What assumptions are we making? Make the dependencies and the uncertainty explicit.
That is a far more useful starting point than asking what percentage of revenue marketing should receive.
The eventual budget still has to fit the economics and priorities of the business. Finance may challenge it. Leadership may decide another investment has a higher expected return. The company may decide it cannot afford the level of growth it hoped to pursue. Those are legitimate strategic decisions.
What matters is that the plan and the budget were developed in the right order.
Start with the growth ambition. Understand what needs to change. Build the strategy. Work out what it requires.
The number comes later.
Evidence informs. Judgement decides.
And if you want to go deeper on building and defending a marketing budget, the FP Collectiv courses cover it properly.