Marketing Budget Categories: How to Structure Line Items and Allocate by Channel

Before creating any line items, establish a clear structure for your budget. This will allow you to analyze the budget later on by owner, goal, category, or any other line item property.

Set Up the Basics

Pick your primary budget currency and establish exchange rates upfront - align with your finance team's rates to ensure consistent company reporting.

Define your planning period in months, typically covering a 12-month span.

If you want to create multiple scenarios, choose the primary budget version to work with (if it's e.g. “optimal”, “aggressive”, “conservative”). While stakeholders might request multiple scenarios later, focus first on creating your working version that aligns with current company goals.

You need clear categories to track different types of spending. While these often relate to company cost centers, keep them separate. Categories should reflect marketing operations and your strategy.

Essential Rules for Categorization

• Keep categories between 3-8. Additional breakdowns create unnecessary complexity and make analysis impossible.
• Combine small categories. When a category represents less than 5% of total budget, merge it with a related larger category. For example, combine “Marketing Events” into “Promotion” if events are a small portion of spending.
• Avoid using an “Other” category. It's impossible to analyze a bucket of random expenses.

Additional Categories to Consider

Consider these categories if relevant for your strategy:

• Creative Production - Covers asset creation costs like studio rentals, video production, and event materials
• Detailed 'Promotion' breakdown - split promotion into PR & Events, Content Marketing, and Influencers & Sponsorships
• Travel & Entertainment - separate tracking if these costs significantly impact your budget

There is no correct split, but there is a normal one. Gartner's CMO Spend Survey divides marketing budgets into four buckets that land within a few points of each other; B2B SaaS teams that run content and demand generation in-house skew toward headcount and away from agencies.

Source: Gartner, CMO Spend Survey 2024. The benchmark that matters most is your own last-year split by category: finance will ask about any category whose share moved by more than a few points.

Create a separate category for headcount costs. Split your workforce budget between full-time employees and contractors. During budget approval and analysis, you'll need to know what percentage of your total budget goes to FTEs (hardest to reduce) versus contractors (quickest to cut if needed).

Each marketing role must align with a clear business goal: acquisition, conversion, or retention. In a growth-driven company, most of your team should focus on acquisition activities.

Each line item in your budget needs specific properties assigned to track and analyze spending effectively. These properties will help you manage approvals, track spending patterns, and analyze budget allocation.

Before diving into specific line items, establish your overall budget target. Your approach here depends heavily on your company's growth plans and your autonomy in budget planning.

Key considerations for setting your budget targeted amount:

• Calculate your base target using Year-over-Year (YoY) growth compared to last year's budget. This gives you a rough framework for planning. Make sure it's aligned with your KPI target growth.
• Put your target budget sum into tools like Etropo. When adding line items, you'll directly see how much budget you have left to allocate. This prevents over-allocation and helps prioritize remaining expenses.

Always plan your initiatives and their business impact first, then add the resources needed to execute them - not the other way around.

Review Existing Expenses First

• Start with importing the previous year's budget. Decide which expenses to keep, reduce, or scale.
• Consider price increases, especially for software tools. Most SaaS companies raise prices annually by 10-20%. Consider this in your calculations.
• Convert monthly subscriptions to annual plans. Not only will this reduce your internal administrative work, but also many tools offer significant discounts for yearly packages, specifically during Black Friday sales in November.

Add new line items

Focus first on new channels and experiments you want to test. Map out marketing initiatives and campaigns before deciding on additional headcount or contractor needs.

Start by analyzing your existing conversion sources. Use your CRM, BI tools, or Google Analytics to understand your key existing marketing channels.

Your marketing channels might include:

Document Channel Performance

For each existing channel, document the following metrics:

• Last year conversion volume
• Channel CPA
• Scalability constraints
• Resources needed

Look beyond just conversion numbers. Sometimes channels with higher CPAs deliver better quality leads that convert at higher rates.

Identify new initiatives and channels

Research potential new channels for next year's investments. Consider:

• Where your target audience spends time
• What competitors are using successfully
• New platforms or ad formats
• Emerging marketing tactics
• Entering new markets with localized marketing

Remember: Focus on channels that can meaningfully impact your key conversion metric. It's better to focus on fewer channels than to spread resources too thin.

Need a starting point? Use one of our industry-specific marketing budget templates with pre-built channel allocations for B2B SaaS, e-commerce, healthcare, and more.