Question

Topic: Other

Benchmark Data: Marketing Budget As % Of Revenue

Posted by Anonymous on 10/11/2007 at 1:29 PM ET 250 Points
We're looking for benchmark data around what companies of similar size (25 mil-50 mil in revenue) and/or in similar business (e.g. Consulting, Professional Services, Business Services) are investing in marketing annually as a percentage of company revenue.

For example, is the marketing budget usually 2% of company revenues or 4% or 6%...?

Much appreciated!
Heather
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  • Posted by Jay Hamilton-Roth on 10/11/2007 at 4:52 PM Accepted
    Here are some articles:

    https://blog.marketo.com/blog/marketing_budgets/
    https://www.imageworksstudio.com/lounge/articles-tips/setting-a-marketing-a...
    https://remodeling.hw.net/industry-news.asp?sectionID=151&articleID=138577
  • Posted by Mushfique Manzoor on 10/13/2007 at 4:53 AM Member
    hi heather

    check out the following link to a similar question asked in this forum.

    https://www.marketingprofs.com/ea/qst_question.asp?qstid=16095

    there is no hard and fast rule of marketing budget as a percentage of the revenue. echoing maria, it depends on your company strategy, what is current market share and position, where you want to go as well as the current and desired position of the company in the perception map.

    also consider which phase of the lifecycle the brand is currently in as well as the position of the brand in "capability-attractiveness matrix"

    your marketing spending should be different for each of the segments;

    for a brand/business in a segment that has low potential and capability, you dont spend much of marketing budget as you are gonna prune your business/brand in this segment.

    for a brand/business in a segment that has low potential but high capability, you again spend a considerable amount as your marketing budget as you need to differentiate your brand/business from competition, to stand out of the crowd.

    hope this helps you to think about it.

    cheers!!
  • Posted by steven.alker on 10/15/2007 at 1:41 PM Accepted
    Dear Heather

    Jay’s sources, whilst very interesting, fall into a category which to my mind, is unhelpful to solving your problem.

    Consider this: “I’m a high value individual - £5M-10M net worth. What percentage of my income should I utilise for off-shore investments and as I’m also not feeling very well at the moment, what percentage of my income should I spend on medical investigations and of what type?”

    Clearly, both aspects to the question are nonsensical, but why should a consensus of opinion on investing profit or turnover from a firm into the gamut of sales and marketing activities available to you, be any more useful.

    As with my Reductio ad-absurdum above, where you book a few days with an investment advisor and a medical specialist in order to gain clear, informed, relevant advice, so should you do with your marketing spend.

    Once you’ve received your advice on the financial and medical problems, you can cost it and then see what percentage of your net worth it comes out at. Likewise with your marketing plans – once you have worked out what you should be doing, then you can come up with a range of costing which will show you the spread of options available to you. When you have chosen the strategy and tactics which suit you, they might be 1.12% of turnover or 9.3% of turnover – who knows.

    I have clients of similar size to you in similar industries. Their marketing spend varies from 0.5% of an £20M turnover with a 45% net margin (They have more need for tax advice than a need for me to tell them about marketing) and another who spends 11% of turnover to produce a 15% return, but employs only 3 people, so in effect, she takes half the week off to spend quality time with her family, learn the piano and follow other pursuits.

    Even if I knew your business extremely well, until I’d studied what you ought to be doing and got your agreement, I couldn’t tell you what % of turnover you should be spending – only what % of turnover you are spending after you’ve done what we agreed for a year.

    I’d like you to look on one very bright side from this though. That you are looking at such metrics indicates that you have the will to measure them and to make the process ongoing. About 67% of SME’s don’t do this and therefore don’t know where they are, where they are going and don’t know when they have got there!

    Good luck

    Steve Alker
    SalesVision
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