Many managers are wondering what an appropriate marketing budget post-COVID is. They are asking themselves: What is the percentage of revenue my peers are earmarking for marketing in 2023? What portion of that should be allocated to digital marketing? And with marketing agency retainer fees rising, should I be doing this in-house?
In this article, we will take a closer look at what other companies are allocating for marketing in general and digital marketing in particular before we dive deeper into the question of what the costs are if you outsource your digital marketing to an inbound marketing agency versus training your in-house team and owning your marketing.
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This calculator was developed specifically for mid-size businesses between $2.5 to $50 million in annual revenue. Industry benchmarks and marketing budgets are calculated accordingly.
Digital Marketing Spend In 2023
According to the CMO Report, marketing budgets accounted for 13.8% of the overall budget or 8.7% of a company's revenue. However, these numbers vary greatly by industry. For example, B2B technology companies will earmark between 10-15% of their annual revenue as their marketing budget. As technology advances, companies allocate an increasing portion of their budget to digital marketing efforts.
On average, 57.9% of the entire marketing budget is spent on digital marketing, with technology being one of the biggest spending industries, with 70.3%. It is also worth noting that, in 2023, it is estimated that 89.6% of companies will include direct expenses of marketing activities as part of their marketing budgets. This reflects a 5.7% increase from 2018 when 64.6% of the total marketing budget was spent on digital marketing initiatives.
The largest portion of marketing budgets continues to be allocated towards salaries and benefits, which comprise 41.1% of the total budget on average. This is followed by agency fees, which account for 15.5% of the total budget, and production costs, which make up 12.7% of the total budget.
Comparing The Costs Of Inbound Marketing Agencies And Doing It In-House
Below, we examine the cost of outsourcing your digital marketing to an agency and compare that cost to the investment required for doing the same work in-house. Because we don't want to bloat the numbers artificially, we did not account for the costs for:
- Marketing automation software license (e.g., HubSpot Marketing Hub Professional: $800/month, $9,600/year)
- Salary for your existing Internal Marketing Manager (On average, the fully-loaded yearly salary will be around $78,000, according to Glassdoor.)
- Buffer for other marketing expenses of $2,000/month ($24,000/year), such as campaign-specific expenses, trade shows, and other extra costs.
These costs won't change much whether you use a marketing agency or insource your marketing.
We also did not account for any increases in retainer fees or salaries over time. In addition, we have compared the investments made over three years because coaching and training are initial investments you have to make to set yourself up for success later on.
Inbound Marketing Agency Typically Charge By Monthly Retainers
The average cost of an inbound marketing retainer in 2023 can vary depending on the size and scope of the project. Depending on the company, this could include content strategy and creation (blog writing, marketing campaign asset creation, etc.), conversion path creation (landing and thank you pages, as well as Calls-To-Action), social media posting and management, and some graphic design as well as website maintenance and development hours.
The cost for these services can range significantly from $2,000 to $40,000 per month or more, depending on the retainer's complexity. Every agency differs, but the premise that "you get out what you put in" is true, regardless of what your agency contracts for expressly.
For example, a retainer including the following activities ranges $5,000 to $8,000 a month, depending on the agency's location, reputation, etc.:
- 1 Long-form (1500 words) blog post/week, including the research, writing, editing, SEO on-page optimization, publishing, and promotion on social media
- Daily social media posting, general monitoring & responding
- Quarterly lead generation campaign, including 3000-word eBook, landing and thank you page, CTAs, promo and follow-up email
The cost of an inbound marketing agency varies depending on the services offered and your specific needs. When evaluating proposals from different agencies consider all the different factors, such as the experience level of agency personnel working on your project, the number of hours required to complete tasks, the type and quality of deliverables, geographic location, availability and expertise needed for specific tasks, and any additional costs associated with third-party tools or software used during the development process. However, understanding the factors influencing pricing can help you make informed decisions when budgeting for an inbound marketing retainer.
What Services Are Extra?
Many inbound marketing agencies offer additional services beyond the traditional retainer agreement. These include additional content creation, website design and development, search engine optimization (SEO), email marketing, social media management, lead generation campaigns, and more.
In addition, especially in the beginning, plan on additional costs for possible workshops, strategy and discovery phases, buyer persona definition work, and other set-up tasks. Depending on your needs and budget, you may consider adding some of these services to your retainer agreement.
How Much Does It Cost To Hire An Inbound Marketing Agency Per Year?
According to Impact, a top-tier sales and marketing training company, the average organization spends about $250,000 to $300,000 per year in Inbound Marketing if they outsource it. "As a company with aggressive goals, you can expect to pay anywhere from $10,000 to $20,000 a month or even more. [...] As a company with more reasonable goals, you can expect to pay up to $5,000 monthly."
To better visualize this, let's run through an example. Assuming an average retainer size of $8,500 a month plus an additional $5,000 ad spend (plus $3,000 agency fee to manage the ad spend), the yearly costs run around $192,000. We chose this size retainer because it is the closest you can get to an apples-to-apples comparison. A full-time content manager employed by your company should be able to strategize, research, create, edit, and manage the same amount of content you would get for an $8,500 retainer.
Ignoring any increase in retainer pricing, the yearly costs remain the same over three years, totaling $576,000.
What Does It Cost To Do Your Marketing In-House Per Year?
Many organizations are afraid to take their inbound marketing in-house because, for the past few years, they have been told by agencies that doing it in-house would be too expensive as they have to hire a full-time content manager, editor, graphic designer, web developer, HubSpot manager, and so on.
While there is some truth to that, much has changed over the last few years. For example, graphic design is something that you can hire a freelancer for, as long as the designer truly understands your brand. You can get a dedicated, talented, highly experienced graphic designer for $500 a month by signing up with a graphic design service provider. Other functions can be fulfilled by employees you already have in-house by coaching and training them.
This brings me to another point. A lot of companies are afraid to bring their marketing in-house because they feel like they don't have the experience and skills internally to do a good job and simply cannot afford to dabble around for two years trying to figure it out. To counteract this, we included below the investment in a They Ask, You Answer Mastery Program that will allow companies to not only learn all the skills needed but also set them up for success for years to come. The mastery program can be completed in 12 to 24 months, but most organizations find that a time frame of 18 months works best for them.
Some comments on the costs: I included a smaller advertising budget for the first six months. If you do the mastery program, after only 180 days, you will see such a dramatic increase in organic traffic and leads that you can reinvest that budget into your training and coaching! You do not need to hire a highly experienced copywriter if you take your content creation in-house. Look for a journalist graduate with boundless curiosity instead. Also, you can hire a full-time videographer after six months. This allows you to get your written content process up and running.
Compared to outsourcing your inbound marketing to an agency, you can save $126,000 or 21.85% over three years. Considering these impressive savings, you could easily hire 1-2 more people to support your team.
Insourcing Your Marketing Has Other Benefits, Too
In addition to costing less, insourcing your marketing is like buying a house rather than paying rent every month. You own the marketing, the skills, and the expertise. You are investing in your business rather than a marketing agency. But there are other, very tangible benefits I want to mention here as well:
- You set the pace for your content publication. Once your content manager gets highly efficient, you can publish as many articles as you see fit, whereas, with an agency, your retainer agreement determines the number of blog posts to be delivered every month.
- You can scale up and down as needed. Because your employees are creating the content internally, it is much easier to scale up as you grow or to pull back on the frequency if needed without having to worry about a contract.
- You will have better content. Did you know that most inbound agencies will contract out the content creation to freelance agencies? Now, you are playing silent post twice removed as the agency will have to explain to the freelance writer what they understood from you. This results in very generalized, fluffy blog post content. If you interview your internal subject matter experts, you get much deeper expertise, knowledge, and experience, which in turn produces much greater quality content.
- You establish trust by becoming the best teacher in the industry. By recording video interviews of your salespeople, management, and other subject matter experts, not only will customers get a much better (visual) sense of what it would be like to work with your company, but prospects will see the human side of your brand. They will learn from you, trust you, and look forward to doing business with you.
I hope you find this helpful in establishing your next year's marketing budget. Remember: with the right team, the right approach, and a little coaching, Inbound Marketing can transform your business. Regardless of your path, the investment will bear fruit over time.
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