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Tuesday, October 4, 2011

Budgets: What do you Spend on Marketing?

Photo from Stuart Miles
 The age-old question is how much your marketing budget should run in comparison to firm budgets or revenues. Should you set them top down?  Bottom up?  In alignment with what your competitors spend?  Should they be a percentage of revenue or profits? As marketers, we know the key to establishing a successful marketing budget is to have an actual plan (in writing) so we can establish specific dollar amounts to spend each month to support our business.  We know that creating an effective marketing program means investing in it on an ongoing basis regardless of how good or bad business is.  

 Go-to-Market Strategies recently published a study that released normative levels for marketing budgets.  According to their research 30% of companies spend between 3-5% of revenue on marketing, with 45% spending over 6% (most of those between 6-10%). They indicated that if a company is launching a new product, or are expecting to launch into a new market or territory, budgets jumped to approximately 20% of revenue.

As marketers, we can take these percentages as a base.  What percentage you use is determined by a number of factors such as, industry (some industries trend higher), how mature is your market (how much education do you have to do), how well known is your company to your targets (are you a new or established business, how much brand awareness do you have to do), and how fast do you intend to grow.   
  • When building your marketing budgets, here are things that I take into consideration:
  • Activities to support the overall brand and the initiatives to support channel activity. These include logos, Web sites, blogs, e-mail campaigns, sales presentations, brochures, ads, etc.
  • Activities to support Business Development.  These include targeting, RFP, events/webinars, proposal efforts, newsletters/e-communications, etc.
  • New developments.  Take into consideration new market expansion, new product/service launches, M&A, downsizing, rebranding, significant announcements, etc.
Note: For those firms that do not have a marketing budget, I recommend that you take a bottom up approach (to gauge what is needed - don't just assign an industry percentage.  Many firms starting out will have smaller budgets as they build their efforts.

Remember to build in some flexibility.  Many marketers include a 1015% contingency in marketing plans because you can never predict 100% what will happen over the coming year(opportunities and challenges). 

Happy Budgeting!

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