Marketing Genius from Maple Creative


Marketing tips, observations & philosophy, plus a few rants and random musings - from those who practice, preach and teach marketing, research, advertising, public relations and business strategy.

Monday, July 19, 2004

How Much to Budget for Marketing?

We face this question almost on a daily basis: "How much should I spend on marketing?"
Answers to this question tend to be vague and elusive. Further, there is not a one-size-fits-all answer or forumula. Nonetheless, I'll take a stab at an answer, since the question is so common.
I'd like to begin by re-framing the question as follows: "How much should you invest in your marketing program?" Then, I would follow with "How much do you want to grow?"
In a survey published by the American Marketing Association, those companies whose mode of selling is primarily business-to-business spent an average of 3.49% of total revenues on marketing. The AMA defines marketing as direct-selling expenses, marketing communications, marketing support, market research and telemarketing. AMA also found that the smallest companies spent more than the average.
Over the years, the Inc. 500 average for marketing budgets has hovered around 10%.
Additional detailed analysis is presented in the following table:
Pctg. of Inc. 500 companies              Pctg. of Revenues
3%                                                                              Less than 1%
43%                                                                            1% to 5%
25%                                                                            6% to 10%
18%                                                                            11% to 20%
9%                                                                              21% to 50%
1%                                                                              More than 50%
We generally recommend that clients invest 5% of total revenues in marketing. However, if the campaign supports the launch of a new company or a new product/service, we recommend a marketing budget of 7.5% for the first year.
As an example, let's say your company has been in business for several years. Last year you recorded $1.5 million in total revenues. Your marketing budget should be at least $75,000 (five percent of $1.5M).
It's not a perfect benchmark, but it's a reasonable starting point. 


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