What to budget for digital marketing as a D2C brand

Fibvo editorial · 8 November 2023 · 4 min read

A common rule of thumb is to spend a fixed percentage of revenue on marketing. For D2C brands, this can be dangerous, because revenue includes the cost of goods, shipping and returns already deducted from what actually reaches the business — spending against the wrong number inflates the apparent budget available.

Budget against contribution margin, not revenue

Calculate contribution margin per order (revenue minus product cost, shipping and payment processing) before deciding how much of it to reinvest in acquisition. This keeps growth spend anchored to what the business actually keeps, not the top-line number.

• Ad spend: the largest line item, sized against target CAC relative to contribution margin, not revenue.
• Email and retention tools: a smaller, high-return cost relative to ads.
• Content and creative production: ongoing, since ad creative fatigues and needs regular refreshing.

A brand spending against revenue instead of margin can look like it is growing while quietly losing money on every new customer.

Adjusting through the year

Increase acquisition spend ahead of known high-intent periods (festive season, end-of-season sales) and pull back during low-demand months rather than spending a flat amount every month regardless of season.

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Written by Fibvo — Bengaluru and Erode, India — working with clients in other time zones. Questions, or think we have it wrong? Tell us.