How much should an ecommerce brand spend on marketing?

The reliable method has three steps and takes an afternoon.

First, work out the gross profit left by an average order after product cost, fees, packing, shipping and refunds. Second, decide what share of that profit you are willing to spend to acquire an order, which depends on your fixed costs and how much profit you need to keep. Third, decide how many new customers or orders you want next quarter.

Multiply the allowable acquisition cost by the number of customers you want and you have the acquisition budget. It is a figure with reasoning attached, which means you can defend it, adjust it when costs change, and tell whether it worked.

Then add the parts that are not acquisition: the retention programme, the content and site work, the tools, the creative production. These are usually smaller and more stable, and they should be planned separately because they behave differently. Acquisition spend scales with ambition. The rest scales with the size of the operation.

The reason this beats a percentage rule is that it exposes the constraint. If the arithmetic says you cannot afford enough customers to hit the growth target, you have learned something specific: either the margin, the order value or the conversion rate has to change first. A percentage rule hides that and produces a budget that quietly loses money.

Setting marketing spend as a fixed share of revenue is popular because it is easy and because finance teams like predictable ratios. It has two problems.

It ignores margin. A store keeping seventy cents in the dollar and one keeping twenty five can spend the same share of revenue and be in completely different positions. One is investing, the other is losing money on every order.

It is backward looking. The share is calculated on revenue you already have, so it cuts the budget in a slow month, which is often exactly when you needed to reach more people, and inflates it in a strong month when demand was already there.

The percentage does have one honest use. Once you have built a budget from the bottom up, express it as a share of revenue and track that share over time. If it is climbing while revenue is flat, efficiency is falling and something needs attention. Used as a monitor it is helpful. Used as a rule it is a way of avoiding the arithmetic.

The same applies to matching what other stores spend. You do not know their margin, their repeat rate or their funding, so the comparison carries no information about what you can afford.

Almost every store underfunds the work that raises the value of existing customers, because acquisition is louder and its results arrive sooner.

Retention work is cheap in media terms and expensive in attention. Email and messaging cost little to send, and the returns come from the thinking: which message, at which moment, to which customer. That means the budget line is mostly people and tools rather than media, which makes it easy to cut and easy to forget.

It is also the work that changes what you can afford elsewhere. If a customer buys twice a year instead of once, the amount you can pay to acquire them roughly doubles. That single change loosens every constraint in the acquisition budget, which is why it should be funded before the last increment of ad spend.

The site itself deserves a line too. Conversion and page speed work is not marketing in the traditional sense, but it multiplies the value of everything you spend on traffic, and it competes for the same budget.

A useful discipline is to write the plan in three parts. What you spend to bring people in, what you spend to convert them once they arrive, and what you spend to bring them back. Then look at the split and ask whether it matches where your revenue actually leaks.

Raise it when the conditions are met, not when the month looks good.

The conditions are simple. Campaigns are limited by budget rather than by demand. The orders they produce are above your break-even with room to spare. The store can fulfil the extra volume without delivery slipping. And your cash can carry the gap between paying for the traffic and collecting the profit.

Raise it in steps, and give each step a few weeks. Doubling spend overnight usually raises the cost per order for a period while everything readjusts, which makes the increase look like a failure when it was the pace that was wrong.

Hold it when the search terms are drifting into things you do not sell, when delivery times have stretched, or when a supplier problem means the products taking the spend are the ones you cannot restock.

Cut when a product group has had a fair run and produced nothing, and when a channel's cohorts consistently fail to return.

And revisit the whole calculation whenever a cost changes. A shipping increase, a supplier price rise or a new platform fee moves the allowable acquisition cost, and the budget that was right last year may be spending money you no longer have.