Editor’s note: This post is one of the most popular on our site and is the #1 search result on Google for “nonprofit marketing budget.” Due to its popularity, we’ve updated it with new information and additional resources to make it even more useful for your nonprofit, and will continue to do so often.
Why your nonprofit needs a marketing budget
Does your organization have a nonprofit marketing budget in place? While creating an effective, accurate, adequately funded budget can be challenging, it’s absolutely critical to your organization’s ability to advance its mission.
Without a budget, most organizations tend to spend as little as they can on marketing and communications, or cut those line items the moment finances get tight. That’s because historically, marketing as been mislabeled as “overhead,” by funders and boards who control nonprofit budgets. But that label couldn’t be less accurate.
Here’s how Dan Pallotta explains the importance of spending on marketing in his famous TED Talk, The Way We Think About Charity is Dead Wrong:
Charitable giving has remained stuck in the U.S., at two percent of GDP, ever since we started measuring it in the 1970s. That’s an important fact, because it tells us that in 40 years, the nonprofit sector has not been able to wrestle any market share away from the for-profit sector. And if you think about it, how could one sector possibly take market share away from another sector if it isn’t really allowed to market? And if we tell the consumer brands, “You may advertise all the benefits of your product,” but we tell charities, “You cannot advertise all the good that you do,” where do we think the consumer dollars are going to flow?
The first move toward spending adequately on marketing involves developing a marketing budget that covers the true costs of advancing your mission and produces a positive return on investment (over the long term). This budget must also be one that your board and funders will approve. Those requirements don’t always mesh seamlessly, so in this article, we’ll walk you step-by-step through the process of developing the sort of marketing budget your nonprofit needs to succeed. This is a long post, so bookmark it for future reading if you can’t get through it all now.
The steps include:
Step One: Recognize the need for a nonprofit marketing budget (and make sure your funders do, too).
Perhaps the biggest mistake your nonprofit can make when it comes to marketing is having no budget at all.
Organizations of every size and shape require some sort of marketing, communications and/or fundraising support to advance their missions. Your nonprofit is not an exception to this rule due to your unique model or structure, no matter how convenient an excuse that may seem for failing to invest in marketing. Marketing and communications support goals like:
- Engaging prospective donors and convincing them to give their hard-earned money to your cause
- Recruiting program participants or end-users of the services your organization provides
- Driving brand awareness and affinity that establishes your organization’s credibility with government funders and foundations
- Attracting volunteers and community support
- Generating support for and organizing action around issues about which your organization advocates
- Driving social and behavioral change
While it’s unlikely that your organization is focused on every goal on this list, you’ll be hard-pressed to find a nonprofit that can’t relate to at least one or two of them. And so every organization needs a marketing budget. Yes, that even includes organizations that don’t feel they need to fundraise.
When nonprofits fail to establish a marketing budget, they’re contributing to what the Stanford Social Innovation Review has bluntly called the Nonprofit Starvation Cycle, in which nonprofits are “left so hungry for decent infrastructure that they can barely function as organizations—let alone serve their beneficiaries. The cycle starts with funders’ unrealistic expectations about how much running a nonprofit costs, and results in nonprofits’ misrepresenting their costs while skimping on vital systems—acts that feed funders’ skewed beliefs.”
It’s bleak, but it’s true. And there are few areas of investment more misunderstood by funders (and more skimped on by nonprofits) than marketing and communications.There are few areas of investment more misunderstood by funders (and more skimped on by #nonprofits) than #marketing and communications. Click To Tweet
That’s due, at least in part, to our good friend the IRS, which has failed to provide specific instructions on how nonprofits should account for marketing and communications in their financial filings. The ambiguity around reporting on marketing spend leads many organizations to allocate their marketing and communications expenses to their programs, and keeps marketing from obtaining the dedicated budget it deserves.
Thankfully, according to the Nonprofit Communications Trends Survey, only 7 percent of nonprofits spend little to nothing on marketing and communications beyond their staff salaries. But an additional 19 percent have no firm budget and find the money for marketing and communications only when needed, and that’s nearly as problematic.
When you develop your budget on an as-needed basis, every tactic, initiative and experiment becomes a major ask because you have to find a way to pull money from somewhere else. Even worse, budgeting on the fly makes it nearly impossible to track and measure the impact of your marketing and communications spend.
How can you figure out which investments are driving your goals forward and which ones are falling flat when your marketing budget is a frenetic mix of as-needed one-off activities? You can’t. And that lack of accountability makes it difficult to make the case for deeper marketing and communications investments in the future. So the vicious cycle continues.
There’s a good chance that you are already convinced of the need for a marketing budget, but your board, funders, or other decisionmakers are not. If that’s the case, simply send them this article. It should do the trick.
Step Two: Determine (roughly) how large your nonprofit marketing budget should be.
Any marketing and communications budget is better than a non-existent one. However, trying to drive meaningful nonprofit marketing initiatives with inadequate investments is a losing battle. Without the funds to support their goals, your marketing and communications team will simply spin its wheels and will end up with little to show for its time and effort.
So how can you figure out what your nonprofit should invest in marketing? It depends who you ask. Most nonprofits that have a marketing budget use one of the following methods to establish it:
The Percentage Method (Our Preferred Option)
Marketing, communications and fundraising (which many nonprofits group as a single line item) occupy a certain percentage of the organization’s total budget—usually somewhere between 10 and 30 percent of the total—depending on the size of organization, its structure and its mission focus. This method makes it possible for your nonprofit marketing budget to scale as your organization scales. See the graph below from Nonprofit Marketing Guide, which will help you determine how much you should be spending on marketing and communications based on the side of your organization. These ranges do not include paid staff.
Source: Nonprofit Marketing Guide
The Dollar Method
Marketing, communications and fundraising are given a set dollar amount based on past expenditures. This method simplifies projections and makes expectations clear.
The Incremental Method
Incremental budgets set up a specific percentage by which marketing, communications and fundraising budgets will increase or decrease on a regular (usually quarterly) basis based on immediate past performance. This method can be a good one to move to after setting an initial baseline using The Percentage Method and implementing against it for a few years.
For now, simply do some quick math to ensure you’re not grossly under-investing. With staff salaries excluded, does your nonprofit marketing budget (or marketing/communications budget) represent at least 5 percent of your organization’s total annual operating budget? If not, you’re significantly limiting the effectiveness of an organizational function that holds huge potential to spur your nonprofit’s growth and mission impact.Does your marketing budget represent at least 5% of your nonprofit’s total annual operating budget? Click To Tweet
Step Three: Refine your nonprofit marketing budget based on goals and expected outcomes.
Despite its widespread use, the percentage method alone isn’t nuanced enough to inform where your organization’s exact marketing budget should land. That method assumes that your marketing and communications should follow the growth of your organization, when in fact, it’s often the other way around. Your marketing should be a growth driver. The dollar method is flawed as well. It bases future investments on past spending, which is almost sure keep your organization’s growth and impact stagnant. And the incremental method can pose challenges, too. It can force nonprofit marketing and communications teams into a rollercoaster ride in which they can never adequately plan their work or optimize its effectiveness based on the results of their initiatives. Our suggestion is use one of those methods listed above as a starting point from which you can base rough spending targets, and then refine your targets based on goals and expected outcomes.
Those goals and expected outcomes will come from your organization’s Marketing Plan, which we believe should be developed in direct response to your organization’s strategic plan. If you’ve followed our suggested process for marketing planning, you will have a plan that includes clear, measurable goals, and a set of tactics required to advance each goal. Your next step is simply to develop estimates of the investment needed to implement each tactic in your plan (minus staff expenses). Then, use past performance metrics and outside data to determine the expected return on each investment: for each dollar spent on a specific tactic or initiative, what can your organization expect to get back? How does that benefit align with the organization’s goal?
Finally, compare the totals you arrived at in this step with the rough ranges you came up with in step three. Are the tactics you’re planning within the range of what you should be spending, and is the expected return great enough to justify the cost? Keep tweaking your budget (and the tactical mix in your marketing plan) until you can answer “yes” to both of those questions.
Step Four: Determine how much to invest in your nonprofit marketing team.
Talent is, without a doubt, the most important component of any nonprofit marketing and communications effort. However, we view your staff as separate from your marketing budget line item for two reasons:
- Marketing and communications staff often wear more than one hat in the nonprofit sector and contribute to development, fundraising, operations, or in some cases, even programs.
- The available data for benchmarking nonprofit budgets (see step two) doesn’t account for staff in the marketing and communications budget line item, so neither do we.
That said, your staff salaries should almost always be your nonprofit’s biggest marketing and communications expenditure. Even if you’re already spending more on staff than on advertising, partnerships and other paid efforts, there is still a good chance you’re underinvesting in your nonprofit’s marketing talent.
There are two ways this underinvestment typically presents itself: through a team that is too small to address the needs of the organization or through staff salaries that are too low to attract and retain top talent.
In their Nonprofit Communications Trends Report, The Nonprofit Marketing guide found that the least effective nonprofits devote a portion of their overall budget that is below the average for organizations of their size to their marketing and communications staff salaries. Your organization’s overall budget is the best indicator of how many full-time staff you should have on your nonprofit marketing/communications team, so take a look at this graph to figure out where you should fall.
But it is possible to have an optimally staffed marketing team and a nonprofit communications budget that is allocated primarily to employee salaries and still underinvest in your nonprofit marketing talent. When that happens, under-market staff salaries are the culprit.
The Nonprofit Communications Trends Report uncovered the following average salaries for a range of typical nonprofit communications and marketing positions:
While it’s great to see that salaries are on the rise, these numbers are still far below the salary that someone in a comparable corporate position can expect to earn. Consider these comparisons:
The average corporate marketing director earns on average $23,853.00 more per year than the average nonprofit communications director (typically a comparable role). The closest corollary to the corporate account executive is the nonprofit communications coordinator, and they earn $7,500 per year less than their for-profit counterpart.
Nonprofit budgets will always be tight, but we need to let go of the misguided belief that nonprofits can pay less for top talent than their corporate counterparts simply because they’re “doing good.” Employees are not overhead, and your organization needs to be able to attract and retain the best and brightest marketing talent for the sake of its mission. The nonprofit sector can’t afford to lose its top performers to the corporate world simply due to sub-standard compensation. It’s time to demand that nonprofit funders, supporters and decisionmakers help organizations find a way to compensate competitive talent with salaries comparable to what these employees could expect to earn in similar corporate roles.
Step Five: Make marketing/communications and fundraising/development their own line items in your nonprofit’s budget.
Many organizations treat marketing/communications and development/fundraising as if they’re one standalone line item when it comes to their budget. But failing to differentiate between these two important functions can make your budget ineffective and nearly impossible to optimize.
Before you think about how to divide these items up in your budget, make sure you actually understand how they differ from one another from a functional perspective. Consider these definitions:
- Nonprofit marketing and communications encompass all the activities you engage in to raise awareness of your organization’s mission and purpose, build affinity and support, and drive targeted parties (from program participants and beneficiaries to volunteers, donors, and staff) toward a desired action that contributes to your goals.
- Nonprofit fundraising and development encompasses the activities you engage in to drive voluntary contributions of funds to your cause from individual and institutional donors.
Fundraising is by no means the only goal that a nonprofit marketing and communications team should address, though it is an important one. For example, the YMCA has an important marketing goal related to driving membership that has nothing to do with fundraising. But on the flip side, not all fundraising activities are marketing activities. The money YMCA of the USA spends cultivating one-on-one relationships with its major donors (taking them to sporting events or sending them thank you gifts, for example) falls squarely into the category of fundraising.
Often, marketing/communications takes a one-to-many approach, while fundraising/development takes a one-to-one approach (though there are certainly exceptions to this rule, especially in today’s digital world).
There will always be some areas where marketing and fundraising overlap. What’s important is that your nonprofit establishes a set standard against which expenses are categorized as marketing and communications or fundraising based on your unique circumstances and structure, and your nonprofit communications budget should follow suit. I’m especially fond of the process the American Red Cross has established, in which all fundraising activities focused on cultivating small donors fall into the marketing budget (which also has several other components related to non-fundraising goals), while all activities related to major gifts fall into the fundraising budget.
Step Six: Educate your stakeholders and stay the course when times get tight.
If you’ve made it to step six, you should now have an effective marketing budget in place that accounts for both the hard costs of driving marketing results, and the investment you must make in talent to bring your marketing plans to life. Your next step is likely to get that budget approved by your leadership and board. Rather than simply putting your numbers in front of them, ensure you spend some time educating these groups about how you arrived at your marketing budget (including data on what other organizations your size are spending). Determine whether they understand the goals you hope to achieve as a result of your proposed spend, and the return on investment you’re aiming for. The resources in this article can help. You may also consider developing several iterations of your budget: a “keep the lights on” budget, a “sector standard” budget and an “ideal world” budget. The comparison between these three different approaches can help those who need to approve your budget understand how changes in investment correlate with changes in results.
Then, once your budget is approved, educate an even broader group of stakeholders about your marketing budget, including your staff and funders of all types, on the basic logic behind your marketing budget. This will help mitigate the risk of your stakeholders trying to reduce your marketing budget when financial challenges arise.
To some uninformed funders and decisionmakers, marketing might seem like a “nice to have” luxury rather than a necessity the moment money gets tight. But cutting your nonprofit marketing budget in typically has the opposite of its intended effect. It will cause you to begin to lose the traction you’ve built with donors, supporters, program participants, and volunteers, and your financial sustainability will decline right along with that traction at the time when you need stability most.Cutting your #nonprofit marketing budget when times get tight will have the opposite of its intended effect. Click To Tweet
As Henry Ford once said, “A man who stops advertising to save money is like a man who stops a clock to save time.” That same thinking applies to nonprofit marketing and communications as a whole.
Rather than dialing your marketing budget back in tough financial times, think about how you can better optimize your spending and innovate your approach to produce faster, better results that get your organization’s overall budget back on track. And make sure you educate your stakeholders about the value of that approach early and often.
Step Seven: Evolve your marketing budget over time.
As we’ve already discussed, the most effective nonprofit marketing budgets are based around marketing goals and expected outcomes, and those goals are based on a marketing plan that aligns with your strategic plan. That means your marketing, communications and fundraising budgets need to evolve every time your organization’s goals and strategy evolve. Simply re-evaluating your budget every fiscal year is not enough. Instead, you should assess your budget monthly (or at the very least quarterly) through the lens of your organization’s broader strategic picture and performance. A new strategic plan is cause for a marketing budget overhaul, but even small changes in strategy or goals often necessitate ongoing budget tweaks.
Are you ready to put these steps into practice?
If so, download Seven Steps to Building A Nonprofit Marketing Budget: A How-To Guide. The guide puts everything you learned in this post into a handy, downloadable PDF that you can share with your team, board and others.
Then, it’s time to get to work. If you don’t have a marketing and communications budget, build one. If your nonprofit marketing budget is under 5 percent of your total operating budget, advocate to increase it. And if your marketing budget is not aligned with measurable goals that stem from your organization’s broader strategic goals, evolve it. The social sector needs to prioritize marketing and communications, now more than ever, in order to maximize its impact on the people, causes and communities it serves, and we’re here to help.
header image photo credit to stubblepatrol.com
Originally published April 11, 2017, updated October 14, 2019.