Article updated on May 16, 2023

The marketing industry has drastically shifted since the COVID-19 pandemic. The globe saw a huge increase in internet shopping and a change in consumer spending. In 2021, the marketing industry was estimated at $155.3 Billion

There is an increasing demand for businesses now that the world is regaining its old spending habits, but as consumer behavior shifts, businesses are navigating an unprecedented time.

So how much should a business spend on marketing? There are no set rules or prices, but if you’re looking for some guidance, read on for a breakdown. First we’re going to talk a little about SEO because you can’t have marketing without SEO.

What Is SEO?

Search engine optimization, or SEO, is the practice of optimizing your web pages to ensure they reach your target audience on search engines. This is unpaid traffic achieved organically from search engine results pages.

This is where SEO gets confusing.

It’s “free” in the sense that you aren’t buying ad space to get viewers. Technically, this means the traffic is unpaid and organic (organic in the sense that your visitors organically find the web page on a search engine results page).

But the process of ensuring your page shows up in search engine results isn’t as free as you’d think.

How SEO Fits into Digital Marketing

How does this fit into your overall digital marketing strategy? For many experts, it’s the foundation of digital marketing as it currently exists.

That’s because your website is now a centerpiece of your marketing tactics. If users cannot find your website, you don’t stand a chance of converting them. This is SEO’s shining moment.

SEO is good at turning your entire website into a tool geared toward attracting online visitors. In some sense, this also makes it the glue that holds many of your other digital marketing efforts together in one cohesive strategy.

Sounds pretty good, considering that SEO is free.

Types of Marketing

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A large shift in consumer patterns became apparent after the pandemic. With this in mind, businesses are having to re-evaluate the importance of marketing.

A common occurrence seen over the last few years, is that businesses on average have spent more revenue on their marketing strategies.

In the modern age, businesses turn to a digital marketing agency for help with their marketing techniques. Getting a clear view of your business’s goals will ultimately help you with the amount you spend on marketing.

It is important to make sure you’re not spending too much money on things that will not benefit your business. Speak to a professional to gain perspective on what marketing is important for you.

Remember that each marketing strategy can widely range in price. A common way to spend on marketing is using a percentage of company revenue. This can also range depending on your desired business growth and the success of your current marketing strategy.

How Much Should a Business Spend on Marketing?

Marketing budgets have increased to 9.5% of company revenue. However, this is still lower than pre-pandemic levels.

With the fall of printed advertising in 2020, these marketing budgets may not ever reach pre-pandemic levels, as so many businesses thrive with online marketing alone. Making sure you’re spending money in the right places is imperative for a business in 2022. With so many marketing options, it’s best to research or even look at marketing case studies to better grasp what your business may need or how easily a marketing strategy can affect its growth.

If you are a small start-up company, you would only be expected to spend the lower end of the spectrum on marketing. If this marketing is successful and your business grows, it would be wise to re-evaluate your spending levels.

Assuming your marketing is successful, you should see an increase in sales and therefore an increase in the size of your business. Keeping up with this is important to stay on a growth pattern and not end up with minimal marketing and a sudden halt in sales.

On average, businesses expect to spend 7-8% of their gross revenue on marketing. This will include a range of strategies.

Picking a Focus for Your Business

Marketing isn’t a one-size-fits-all package. Some businesses may spend thousands on print advertising and your business may not need it.

It’s important to have clear set goals for your business and who your audience is. A poor marketing technique could lead to your business spending money on things you shouldn’t need.

Picking a focus for your business will certainly make sure you have a clearer spending plan for efficient techniques to grow or stabilize your business.

Choosing the right marketing strategy is highly important. This will determine your spending on marketing for your business. Here are some sectors of marketing businesses tend to spend money on:

While there are more marketing focuses, these tend to be used by a wide range of business sizes and structures. You can find out more information on what makes a good marketing team to create marketing success here.

The pricing for each differs but you may benefit from hiring a specialist marketing agency to handle all levels of advertising and marketing in your businesses, which may work out more cost-effective and help your sales more than separate marketing campaigns.

Spend Accordingly

Many businesses over the last few years have realized the importance of marketing. Even though businesses have always marketed themselves and advertised their product or service, the shift in companies paying more for advertising recently has been clear.

With the competition so fierce, it’s not a coincidence your consumers will find you online. You have to make it so with a plan.

As the online world grows, so does the likelihood of duplicated businesses. While this is common, a more effective marketing strategy can show your success in comparison to others.

A marketing agency can help you spend accordingly. This will help your marketing strategy grow with your business so you are never spending too much or too little on campaigns.

Planning your business growth with a marketing agency can also make you aware of how each tool will work together to help your business. This will also come at specific costs for a marketing package. It can be easier to choose a budget if you know up-front how much a marketing package will cost.

Typical SEO Payment Models and Costs

Keep in mind, however, that SEO isn’t as free as you’d think.

That’s because everyone and their brother is trying to rank on search engines. Once upon a time, sometime around the Stone Age of the Internet, creating a website and using keywords was enough to rank. Search engines have refined their algorithms significantly since then. 

These days, keywords aren’t enough. Search engines figured out that a lot of spam sites were using this method to game the system, and since they’re in the business of providing a good customer experience, they changed the rules of the road to prioritize good content. 

The tricky part now is that marketing experts don’t know all the rules of the road (search engines don’t publish all their ranking factors) and ranking well is no longer a matter of simply putting good content online. You have to ensure that content and the site it occupies meet the criteria to rank well. And in the meantime, search engine algorithms are still updating. 

As such, getting your site to rank well isn’t a once-a-week endeavor. It’s a full-time job in its own right. This is why SEO is only technically free–in reality, you can sink quite a lot of money into “free” traffic.

SEO services are typically broken up into costs based on one of four payment models:

Let’s take a closer look at each.

Monthly Retainer

A monthly retainer is an ongoing contractual agreement where one business dedicates a set number of hours per month to one specific client at a set rate. Contracts will typically address:

Basically, from your side, this means you pay a set amount of money per month to receive agreed-upon services. Many businesses prefer this model because it offers the highest ROI (return on investment).

The price of a monthly retainer varies depending on the size of the business and the extent of services offered. Smaller SEO agencies offering limited services may price around $500 per month, while large agencies offering full-service packages can price as high as $5,000 per month.

Fixed-Price Contract Services

Most SEO agencies also offer some form of fixed-price contract services. This is not to be confused with project-based pricing, though they operate on a similar concept.

In this case, rather than paying a monthly retainer for a package of services, a client can choose certain services offered by the agency at a fixed-price contract rate. In this case, the cost of the service does not depend on the amount of time spent or the resources expended–payment is agreed upon in advance, regardless of how time-consuming or expensive the service is.

Once the service is completed, the contract is completed and your business has no further obligation to the agency or vice versa. If you need the service again, you’ll pay the same fixed price to have the contract repeated.

A good example of a fixed-price contract service is a website audit, including competitive analysis, keyword analysis, and an assessment of the strength and weakness of your online presence.

These prices vary depending on the agency in question, the type of service offered, and the extent of the service. Copywriting paid on a per-word basis can charge $0.10 per word, while a full-service social media setup can range from $500 to $3,000. Agencies offering fixed-price contract services will advertise these fees on their site.

This particular option is popular for businesses that are just starting out with SEO. This gives you a chance to test-run the service and see if you like what you get before you invest in a more extensive service. Or, if you’re a business on a shoestring budget, you can pay for only the services you need and manage the rest in-house.

Project-Based Pricing

Project-based pricing uses a similar premise to contract pricing, which is why they’re easy to confuse.

The difference between contract fees and project fees is how the fees are fixed. Contract-based fees are published on the agency’s website as fixed rates for all clients who opt for them. Project-based fees, on the other hand, are customized to the client.

This is because the services provided by the project are not fixed in advance. Instead, a client comes to an agency with a project and outlines what services they want included. The agency then outlines an approach and how they might charge for it. Between the client and the agency, they hammer out the details of services, timelines, and pricing until an agreement is reached.

Let’s say, for example, that you want to get your blog up and running. You go to an SEO agency and outline what you want for the project. They work with you to iron out the scope and timeline of the project, along with project fees for your specific case.

Because project fees are customized, prices on the market vary widely. If an agency offers fixed-rate contract services, this is a good way to get an idea of what their fee structure might look like for project-based pricing, since they will generally draw their pricing numbers from the same basic model.

The benefit of project-based pricing is that you don’t have to get services you don’t want or settle for a certain level of service. Instead, you can iron out exactly the details you want for a price that works for your goals. That said, you should come prepared to have a serious negotiation and you should know what you want before you set the project scope.

Per-Hour Consulting

Last but not least is per-hour consulting, which is one of the most in-and-out models.

For this particular model, an agency offers a client consulting services, typically more information about the state of their site or information about a specific service, at an hourly rate. This can be done as a standalone service, but many agencies package it in with other pricing models as a weekly or monthly consult with site owners.

Regardless of whether you’re dealing with an individual or an agency, good-quality consults will typically range from $100 to $300 per hour.

Individual Specialist vs. Agency

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This brings us to another point in SEO spending: whether you hire an individual or a full SEO agency. For most businesses, this is the difference between hiring a freelance SEO consultant or hiring a marketing agency to perform SEO services.

Individuals and agencies will offer most of the same services, barring a few enterprise-level investments in tools that are in-budget for an agency but not an individual. For that reason, it’s essential to have a real conversation with an individual about the extent of the services they can offer if you do want full-service options.

When to Hire One or the Other

An SEO consultant is a handy alternative to hiring someone in-house. You may not have enough to keep them busy all year, and that’s fine–you can bring on a consultant when you need them and then move on.

Individual consultants also have the most consistent pricing across hourly, monthly minimum, and one-time project fees.

Consultants with less than a year of experience charge an average of $50 per hour, $500 monthly minimum, and $1,000 for single-project pricing. Consultants with 10 or more years of experience charge an average of $150 per hour, $1,500 monthly minimum, and $1,800 for single-project pricing.

Yet consultants with one to three years of experience charge the highest hourly rate ($275).

With agencies, however, there’s relatively limited rhyme or reason in pricing. The general rule of thumb is the bigger the agency, the higher the prices, though agencies with 2 to 5 or 6 to 10 employees actually charge more than those with 11 to 20 employees.

Ideally, you should only work with an SEO consultant if you have a marketing expert on staff–that way, the consultant simply supplements their work and helps them stay on the right track. Otherwise, you would be better served spending your money on an agency.

It’s also a question of what you want from your project dollars. SEO consultants can sometimes provide more individualized attention, but SEO agencies can go much more in-depth, offering real-time progress reports. That’s because agencies have the resources to handle your project in-house while consultants have to outsource to trusted freelancers and small firms.

Budget Expectations and Reality

With that in mind, it’s time to have a real talk about the gap between expectations and reality.

If you’re like most business owners, you have no clue how SEO actually works. You just know that your marketing person says you need it for your site to convert customers. So you make an investment in the shiniest option–if you invest at all.

In fact, 54% of businesses don’t have an SEO budget at all, and the next highest percentage, 17%, only spent $1 to $99 a month. That’s probably because 38% of businesses think they can spend $1-$99 per month to see major search engine results. In fact, 33% of businesses think it’s very likely they can rank in the first page of Google results.

Spoiler alert: you get what you (don’t) pay for.

This is why your marketing inbox is crammed full of offers of “guaranteed first page results” for “just $99”. Scammers know the market–businesses want first-page results, but they’re unwilling to pay first-page money to get there.

The High Cost of Cheap SEO

Unfortunately, wasted money isn’t the only cost of cheap SEO.

When you’re dealing with get rich quick (er, first page fast) schemes, you’re most likely dealing with black hat SEO. These are marketers whose goal is to game search engines rather than strengthening a client’s website.

The first option can be done relatively easily, if you know what strings to pull. The second option requires months of dedicated SEO work.

Sounds like a good deal, right? Not so fast.

Google and other search engines are businesses too. And like you, they’re in the business of keeping their customers happy with an outstanding customer experience. They also know that businesses want to game the results with bad content, and this irritates customers who find themselves reading irrelevant content.

For this reason, search engines take first page fast schemes quite seriously. You may face a penalty, and it’s not just a slap on the wrist–the wrong Google penalty (or the wrong combination of Google penalties) can wipe your site’s visibility off the map. One day you’re there, the next day you’re gone. You’ll still need to pay to recover the loss once the dust settles.

And for the record, if you think you can get away with it, you’re thinking like many business owners who fell for a first page fast scheme. All of those business owners were proven wrong. Search engine algorithms are getting smarter every day and they know how to spot a site that rockets through the rankings suspiciously quickly.

Red Flags

For this reason, you should always stay away from SEO agencies and consultants that throw up certain red flags. Common red flag language includes things like:

Though it would be nice to pull results out of a hat like a white rabbit, the reality is that SEO is difficult and time-consuming. You’re going to have to sink resources into this project, and that’s going to cost you. In SEO, as with many things in life, you get what you pay for.

That doesn’t mean you need to sell a vital organ to get good SEO. It just means you have to know what you’re paying for and know how to make your budget work.

How Much Should You Be Spending on SEO?

This brings us back to our original question: how much should you be spending on SEO?

The short answer: it depends.

The long answer: it depends on you.

If you’re in it for the long-run, how much you should invest in SEO depends on the results you want to see for your trouble. It also depends on your budget and your other efforts. Like eating vegetables, SEO doesn’t do you much good if you rely on it alone–it has to be strategically combined with other efforts.

The best place to start thinking about your budget is, well, your budget. Counterbalance it with an understanding of the common fallacies of newbie SEO investment and you’ll have a clearer picture of how much good SEO is worth to you.

How to Build Your Budget

With that in mind, let’s take a closer look at how to construct your budget. There are a few essential questions here. You’ll notice that none of them relate to SEO itself–they all relate to you. What you need, what you want, what you hope to see in the long run.

What Do You Need?

The most basic question is this: what do you need? In other words, what benefit will SEO provide to your business? What do you need it to achieve?

Let’s say, for example, you’re starting a business in a relatively new industry. In that case, SEO will have to work much harder. The rest of the industry hasn’t done the work of getting in front of customers. The more work SEO has to do, the more expensive it will be, and that may be an unrealistic price tag.

On the other hand, if you’re in an established industry and looking to get ahead of your next closest competitor, SEO’s job is to snatch a few of those customers rather than conjuring them from the wilds of the Internet. You may not be able to compete with the big boys of the industry, but you can certainly compete with companies on your level.

What Are Your Goals?

This leads into the next question: what are your goals?

The point of this question is to set realistic expectations. You won’t be able to shoot to result one on page one of Google overnight, but you can outpace competitors. Think about SMART goals: Specific, Measurable, Achievable, Realistic, and Time-based.

Saying “I want to increase my revenue,” is a broad and unrealistic aim. It also sets a huge margin of error–any amount of increased revenue could be viewed as a success. A better goal is, “I want to increase my revenue by 15% by the end of this quarter.” From there, you can break the goal down into benchmarks and tasks. These will help set the bar for your SEO budget.

Let’s Change the Way You Think About SEO

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How much should you be spending on SEO? At the end of the day, that depends on your business.

We’re here to make that calculation a bit easier.

We know SEO as well as you know your business–inside and out. Our goal for all our clients is 7x or higher ROI, whatever that means for your project or your investment. We’re here to help you understand SEO, both the technique used to strengthen your site and why our tactics are priced a certain way. After all, it’s your business–you should be able to make informed choices.

Finding the right help for your business is crucial. We no longer live in a world of billboards and print media. While there is still some success in printed advertising, the rise of digital marketing is already huge and still growing quickly.

As the industry is constantly shifting, it would be worth seeking professional marketing help. If you’re looking for more information on how much a business should spend on marketing, get in touch for marketing advice.

How can we help?