An ecommerce marketing budget is the total you commit to winning and keeping customers over a period: the advertising, the people who run it, the content it needs, and a reserve for testing. Most founders budget only the first line, then meet the others on invoices.
This guide covers the whole budget. For what providers charge and how their fees are structured, see what an ecommerce marketing agency costs.
You will often read that a store should spend a set percentage of revenue on marketing. There is no universal percentage. The right figure depends on margin, how new the business is, repeat purchase, cash and what you are trying to achieve. A rule that suits a high-margin brand with loyal customers can sink a low-margin reseller.
Separate media, people, production and testing
Put each type of cost on its own line. They behave differently, and mixing them hides what is actually being spent.
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Media.
Money paid to advertising platforms such as Meta and Google. The most visible line, and the easiest to change quickly.
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People.
Whoever plans, runs and reports on the work: an outside provider, a freelancer, a part-time hire, or you. Your own time is a cost even when no invoice arrives.
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Production.
Photography, video, ad design, copywriting, email design and landing page changes. Ads without fresh creative tend to wear out, so this line recurs.
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Tools.
Email platform, analytics, review apps, design software. Small individually, noticeable together.
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Testing reserve.
Money set aside for trying something uncertain, with a cap agreed in advance. Keeping it separate stops a failed test eating the core budget, and stops a lucky one being mistaken for the plan.
Website work sits awkwardly. A one-off rebuild is usually a project with its own budget. Ongoing conversion improvements belong in the marketing budget. Decide which is which before the year starts.
| Budget line | Monthly amount | Fixed or flexible | What to fill in |
|---|---|---|---|
| Media: Meta | $2,000 | Flexible | Planned spend and the cap you will not exceed |
| Media: Google | $1,000 | Flexible | Planned spend and the cap |
| People: provider or freelancer | $2,000 | Fixed for the term | Fee, notice period and what it covers |
| Production: creative | $700 | Semi-fixed | Assets needed each month and who makes them |
| Tools | $300 | Fixed | Subscriptions the plan depends on |
| Testing reserve | $500 | Capped | The test, its limit and its review date |
| Total | $6,500 | Media $3,000; everything else $3,500 | |
| Your own time (not in the total) | Hours per week | Fixed | Hours the plan needs from you, and what it would cost to replace them |
Hypothetical figures for illustration, ex GST. They are not recommended amounts or market rates.
Work from contribution and business requirements
Start from what each order leaves after the costs of making and delivering it, before any marketing. That figure is contribution, and it is the money marketing has to be paid from.
What the planning table has to earn
The same store sells at a $90 average order, ex GST. Product cost is $30, shipping and packing $12, payment fees $3 and a returns allowance $3. That leaves $42 of contribution per order before marketing.
Its break-even return on media alone is $90 ÷ $42 = 2.14x. That is the number most people calculate, and it only covers the ads.
The full budget is $6,500 a month. To cover it from contribution, the store needs 155 extra orders a month that would not have happened without the marketing ($6,500 ÷ $42 = 154.8, rounded up). At $90 each, that is $13,950 of revenue.
Measured against the $3,000 of media, that is a return of 4.65x ($13,950 ÷ $3,000) just to pay for the marketing budget, before rent, wages, the founder's pay or any profit.
This is why a platform reporting 3x can still leave the business worse off. The ads may be clearing their own break-even while the budget as a whole is not.
Then add the business requirement. What does marketing need to contribute towards fixed costs and your pay? If the answer needs a return your store has never achieved, the budget is not a plan yet. What a good ROAS is explains how to separate the return you need from the return you can reasonably expect, and the break-even ROAS calculator does the first-order arithmetic for you.
A target you can't hit isn't ambition.
Account for stock and cash timing
A budget can break even on paper and still run out of cash, because costs and revenue do not arrive at the same time.
| Cost | When cash usually leaves | When the related revenue arrives |
|---|---|---|
| Stock | Weeks or months before the sale, often in minimum order quantities | When the stock sells, which may take several months |
| Media | Daily, or when a billing threshold is reached, often on a card | As orders come in, then after your payment provider's payout delay |
| Provider fees | Often monthly, sometimes in advance | Depends on the work; some early work pays back later, if at all |
| Production | Before the creative runs | Across the life of the creative |
| Returns and refunds | After the sale | Revenue you counted leaves again |
Back to the example. To fulfil 155 orders, the store needs $4,650 of stock on hand (155 × $30). Add the $6,500 budget and the plan commits $11,150 of cash before shipping and payment costs are paid on each order. The revenue comes back over the month and beyond. If stock has to be bought in larger minimum quantities, the commitment rises again.
Two questions settle whether a budget is survivable. What is the most cash the plan could have tied up at its worst point? And can the business carry that without missing a supplier payment, a tax bill or your own pay? If you are thinking about adding spend to something already working, when to increase your ad budget covers the stock, cash and capacity checks in more detail.
Choose a bounded test and review point
When the numbers are uncertain, which is most of the time with a new channel or offer, do not commit a year's budget. Commit a test with limits.
- 1
Name the question.
One question per test. For example: can Meta ads win customers for this product at or below $42 each, the example's first-order break-even?
- 2
Set the cap.
The most you will spend, in media and everything else, including production and fees. Decide it before launch.
- 3
Set the review date.
Long enough to gather usable evidence for your order volume, short enough that a bad result does not become an expensive habit. There is no universal number of days.
- 4
Write down continue, change and stop.
Agree the thresholds first. Afterwards, everyone finds a reason the numbers were nearly good enough.
- 5
Judge it on business numbers.
Store orders, contribution and cash, not only what the platform reports.
Low volume makes this harder. If a test produces twelve orders, a few orders either way can change the conclusion. Treat small results as direction, and decide in advance what would make you extend a test rather than scale it.
Before you approve the budget
- Every cost type is listed, including your own hours.
- Contribution per order is calculated on a consistent ex-GST basis.
- You know the break-even for the whole budget, not only for media.
- Peak cash need is estimated, including stock.
- Each test has a question, a cap, a review date and decision thresholds.
- Someone owns the review and has the time to do it.
The budget sits inside a wider plan. How to build an ecommerce marketing plan covers channels, priorities and capacity. More measurement and planning guides are in the resources hub.
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About the author
Mareike NiedermeierMareike Niedermeier is the founder and CEO of Sales Savvy Online and the creator of Survivable Distance, a theory of ecommerce viability. Since 2019 her team has worked with more than 200 ecommerce brands. The Australian Business Journal named her a Top Ten Marketer in Australia.
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