Why Most Marketing Budget Advice Is Wrong (And What Actually Determines What You Should Spend)

Every marketer has heard some version of the same advice:

• “Spend 5–10% of revenue.”

• “Follow the 70/20/10 rule.”

• “Match your competitors.”

• “Invest more in brand.”

• “Invest more in performance.”

It all sounds smart. It all sounds strategic. And in the real world, it all falls apart the moment you apply it to an actual business with actual constraints, actual margins, actual delivery issues, and actual leadership incentives.

The truth is simple:

There is no universal marketing budget.
There is only what your business model can support, and what your ambition requires.

Everything else is folklore.

The $5 Million Lesson That Makes This Obvious

I’ve seen incentive structures where a single bonus target blocked millions in potential revenue, even when the spend was free and the risk was minimal. That’s what happens when internal politics override contribution logic.

But the incentive structure said, “protect the bonus,” not “grow the business.” The business lost out on $15–25M in “free” revenue, all to protect a $20K bonus.

That’s the problem with percentage-based budgeting. It ignores:

• incentives

• contribution

• margin

• ambition

• opportunity cost

And it leads to decisions that look rational on paper but irrational in reality.

Why Benchmark Budgeting Fails

Let’s take the most common approaches:

Percentage of revenue

Works for textbooks. Fails for businesses with:

• low margins

• high margins

• seasonal spikes

• perishable inventory

• long repurchase cycles

• operational bottlenecks

So… most businesses.

70/20/10 rule

A nice idea. But it assumes:

• stable markets

• stable margins

• stable competition

• stable delivery

None of which exist.

Match your competitors

Your competitor’s margin structure is not your margin structure. Their CAC is not your CAC. Their brand equity is not your brand equity.

Brand vs. performance

This debate only exists when people don’t understand the business model. Brand matters. Performance matters. But the ratio is dictated by:

• trust

• awareness

• repurchase cycles

• category dynamics

• contribution margin

Not opinions.

The 7 Variables That Actually Determine Your Marketing Budget

After 25+ years across CPG, DTC, luxury, SaaS, automotive, retail, and local services, here’s what actually matters.

1. Margin Structure

In luxury DTC, I’ve seen brands profitably scale at 2X ROAS because their margin structure (>90%) supports it. When contribution is strong, the percentage of revenue becomes irrelevant.

A personalized DTC business based on a major CPG brand could spend 5X as aggressively on marketing because contribution margin supported it.

In global CPG, I’ve seen companies spend just 5% on consumer marketing, but when the brand scale is enormous, the absolute dollars are still game-changing. And it should stay a low percentage (it has a negative ROI short-term.)

Margin dictates spend. Not benchmarks.

2. Repurchase Frequency

In automotive, repurchase cycles can stretch 5–10 years. That changes how you define “lapsed” and how you structure retention. It also impacts your CTR and conversion rates. They want your car, just not today.

MYM&M’s customers buy once a year. Regular M&M’s buyers purchase weekly. What’s the value of a customer?

Different cadence → different CAC → different budget.

3. Delivery Constraints

In the first six months of MYM&M’s, we couldn’t scale marketing spend because we couldn’t scale production.

Sony had a tsunami wipe out inventory. We had to reallocate spend to products that actually existed.

Marketing cannot outrun operations.

4. Brand Maturity

A no-name startup cannot behave like Mars.

Brand equity changes:

• CAC

• conversion

• trust

• click-through

• repurchase

• virality

A SNICKERS email example proves it:
A plain-text email to 452 people generated 45,000 clicks because the brand equity did the heavy lifting.
But there was no ability to attribute revenue to it. (Granted, cost was near $0, so does it matter?)

I worked for a business media company that would send 72 million emails a week to try and get the same 45,000 clicks. No brand recognition, not targeted, “buy, buy, buy” messaging, and a shady reputation online.

5. Competitive Pressure

Bid landscapes matter. If your competitors are:

• overbidding

• saturating

• targeting the same audiences

…your budget must reflect that reality.

6. Leadership Incentives

The bonus over profit story is the perfect example. The leadership of the parent business was fine “giving” the spend to the DTC subsidiary because a 1X ROI was way better than what they got in CPG. The leadership within the DTC subsidiary was focused on their narrow metrics.

Budgets are not just math. They’re psychology.

Later when working for a luxury consumer goods company with a direct arm, the president of the company was more than happy to move $10M of marketing spend to direct for a promise of 2X ROAS. Why? Because his incentive was growth and profit, not an ROAS goal.

7. Ambition vs. Affordability

In high-margin service businesses, I’ve seen leaders resist marketing spend, even when it would shrink overhead and increase profit. “I can’t afford marketing” often means “I haven’t reframed marketing as a profit center.”

Ambition determines scale. Affordability determines guardrails.

Real-World Examples That Break the Rules

When high spend is the only rational choice

• High-end consumer goods (electronics, cosmetics) when going direct to consumer with the same product your margins are astronomical, you can drive more market contribution with higher spends even if the ROI is lower.

• Unlike their high-momentum parent brands, the smaller DTC units can see and feel the impact of marketing spend in almost real-time. At one DTC brand, we would meet at noon to see if we were coming close to our noon goal, and if the day was looking light, we would amplify the ad vehicles that could drive more sales profitably.

When low spend is the only rational choice

• I’ve worked with startups where selling more actually increased losses. In those cases, the right marketing budget is zero, until the model is fixed.

• If your margin is low, you may not have room for marketing. The better option is to figure out how to improve margins and make room; it is not to accept that you can never market.

When repurchase cycles change everything

• Major household goods, automotive, real estate: in-market cycles are infrequent, but still value in communicating.

• Food and beverage, retail, consumables: frequent purchases, more immediate impact for more people.

When delivery caps spend

• When you have a capacity constraint (machines and facilities) it’s a waste to spend for demand you can get naturally.

• I’ve seen global brands face inventory shocks that made their top-performing products unavailable. Marketing had to pivot toward what was in hand, not what was popular, maybe even temporarily cut marketing altogether.

When ambition outpaces affordability

• I’ve seen startups expect massive growth with minimal spend, hoping for CACs that only exist in folklore. Ambition must be matched by investment.

• One of the barriers we’ve also seen is startups that have neither capital nor capability. “I need somebody to give me $1M so I can pay somebody to build this and then I’ll spend $100k on advertising. “

• A small, fixed budget could be considered your “seed money” to do the testing and validation or initiate some high funnel branding awareness campaigns. A fixed budget won’t drive the growth you want.

These aren’t edge cases. They’re the reality of marketing.

The Quadrant Lens: Why Budgeting Is a Leadership Exercise

Your budget is not a number. It’s a reflection of:

Vision

Ambition, financial model, contribution targets.

Structure

Systems, data, delivery capacity.

Culture

Audience resonance, brand maturity, messaging.

Execution

Testing, optimization, constraints, saturation.

When these four quadrants align, the budget becomes obvious.
When they don’t, the budget becomes political.

The Two Most Common Budgeting Mistakes

1. Scaling too early

When I first started working on small startups I was surprised how much harder it is to sell something that nobody knows about. When you’re used to working on big brands you take for granted the power brand has. Started off with need-state and conversion tactics from the onset because the product was a no-brainer to buy (in my head.)

Burned budget. Minimal sales.

2. Scaling too late

When we had initial capacity constraints somebody bought one of the first interstitial ads on AOL and captured one year of capacity in one hour. Upset customers, no actual revenue growth, just noise, anger, and cost.

We almost missed the window. That exercise woke up senior management that this needed energy and investment.

The Real Question Leaders Should Ask

Marketing budgets don’t fall apart because leaders lack discipline, they fall apart because the business model, incentives, and ambition aren’t aligned. Once you understand the system you’re operating inside, the “right” budget becomes obvious. When you don’t, every decision becomes political.

If your marketing spend feels disconnected from your goals, your margins, or your team’s capacity, you’re not imagining it. You’re seeing the system clearly.

Be sure to read this next

These pieces deepen the pattern and help you see where misalignment begins:

• The Chaos Cycle: Why Agencies Stay Stuck
  How urgency, overfunctioning, and leadership habits distort decision‑making.

• Why Organizations Fix Symptoms Instead of Systems
  The hidden mechanics behind misalignment, bottlenecks, and reactive execution.

• The 3 Archetypes of Leadership Drift
  Why leaders get pulled off‑course, and how to recognize the signs.

Ready to see your own patterns?

If you want a structured way to understand where drift is shaping your marketing decisions (and your business model) start here:

A 20‑question assessment that maps your leadership system across Vision, Structure, Culture, and Execution.

See how others aligned their system

Real examples of leaders who rebuilt clarity, contribution, and growth:

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