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Defining advertising and marketing budgets

Wayne McMaster

23 August 2016

The first question we ask a new client is, “Do you know what your budget is?” Usually that’s when we see the client’s eyes get as big as saucers as they reply, “I have no idea! That’s what I thought you were here for.”

As a rule of thumb, between 8 percent and 12 percent of turnover should be budgeted for advertising and other marketing activities.

This amount obviously varies significantly by company and sector. An average company may spend 6 percent of turnover on advertising alone.

You should spend more on advertising and marketing if the following conditions exist:

  • You are building a new brand
  • You are launching a new product or service. (Some new businesses and brands spend between 50 percent and 100 percent of revenues the first year of launch)
  • Your product offering is large and complex
  • Your brand is a luxury brand
  • You charge premium prices
  • More than 10% of your sales come from online purchases

We found a recent survey of sales and marketing professionals that reported these marketing and sales budget distributions:

Marketing Budget

(as percent of revenue):

% of Revenue % of Companies
No Budget 1.1%
0-2% 28.6%
3-5% 33%
6-10% 21.1%
11-15% 8.6%
16-20% 4.3%
20+% 3.2

 

Is 10% the Magic Number?

According to a 2014 Gartner Research study, “companies spent on average 10.2% of their annual 2014 revenue on overall marketing, with 50% of companies planning to increase [in 2015] to an average of 10.4%.” Ten percent — the magic number you will likely hear whenever you ask how much of your revenue you should spend on marketing. But is that true for everyone? What about a company in its growth phase vs. a well-established brand like Apple? Is 10% really the magic number and if so, what does a 10% investment in marketing get you in ROI?

According to a 2014 CMO survey published by the American Marketing Association and Duke University, companies with:

  • less than $25 million in revenue spent an average of 11% on marketing
  • $25-$99 million in revenue spent an average of 9% on marketing

The study also broke down the averages for marketing investment as a percentage of revenue by business type:

  • B2B Product Businesses: 10.6%
  • B2B Service Businesses: 10.1%
  • B2C Product Businesses: 16.3%
  • B2C Service Businesses: 10.9%

So while the 10% number may be right for some businesses, it is definitely not a one size fits all figure.

- See more at: https://vtldesign.com/inbound-marketing/content-marketing-strategy/percent-of-revenue-spent-on-marketing-sales/#sthash.nMD6wFbN.dpuf

So where does your high-end interiors or lifestyle brand sit with your marketing budgets compared with these figures?

So is 10% the magic number?

According to a survey by Gartner Research companies spend on average 10.3% of their turnover. Established companies found they do not need to spend as much on aggressive markeing as some of the younger newer companies to the sector.

So new companies that have been in business for one to five years, the benchmak may be 12 to 20 percent of turnover on marketing. Established companies are likely to spend between 8 to 12 percent of their turnover. The stronger, more differentiated the product or servcie your company has, the less it needs to be propped up by advertising.

Is 10% the Magic Number?

According to a 2014 Gartner Research study, “companies spent on average 10.2% of their annual 2014 revenue on overall marketing, with 50% of companies planning to increase [in 2015] to an average of 10.4%.” Ten percent — the magic number you will likely hear whenever you ask how much of your revenue you should spend on marketing. But is that true for everyone? What about a company in its growth phase vs. a well-established brand like Apple? Is 10% really the magic number and if so, what does a 10% investment in marketing get you in ROI?

According to a 2014 CMO survey published by the American Marketing Association and Duke University, companies with:

  • less than $25 million in revenue spent an average of 11% on marketing
  • $25-$99 million in revenue spent an average of 9% on marketing

The study also broke down the averages for marketing investment as a percentage of revenue by business type:

  • B2B Product Businesses: 10.6%
  • B2B Service Businesses: 10.1%
  • B2C Product Businesses: 16.3%
  • B2C Service Businesses: 10.9%

So while the 10% number may be right for some businesses, it is definitely not a one size fits all figure.

- See more at: https://vtldesign.com/inbound-marketing/content-marketing-strategy/percent-of-revenue-spent-on-marketing-sales/#sthash.nMD6wFbN.dpuf

Is 10% the Magic Number?

According to a 2014 Gartner Research study, “companies spent on average 10.2% of their annual 2014 revenue on overall marketing, with 50% of companies planning to increase [in 2015] to an average of 10.4%.” Ten percent — the magic number you will likely hear whenever you ask how much of your revenue you should spend on marketing. But is that true for everyone? What about a company in its growth phase vs. a well-established brand like Apple? Is 10% really the magic number and if so, what does a 10% investment in marketing get you in ROI?

According to a 2014 CMO survey published by the American Marketing Association and Duke University, companies with:

  • less than $25 million in revenue spent an average of 11% on marketing
  • $25-$99 million in revenue spent an average of 9% on marketing

The study also broke down the averages for marketing investment as a percentage of revenue by business type:

  • B2B Product Businesses: 10.6%
  • B2B Service Businesses: 10.1%
  • B2C Product Businesses: 16.3%
  • B2C Service Businesses: 10.9%

So while the 10% number may be right for some businesses, it is definitely not a one size fits all figure.

- See more at: https://vtldesign.com/inbound-marketing/content-marketing-strategy/percent-of-revenue-spent-on-marketing-sales/#sthash.nMD6wFbN.dpuf

Is 10% the Magic Number?

According to a 2014 Gartner Research study, “companies spent on average 10.2% of their annual 2014 revenue on overall marketing, with 50% of companies planning to increase [in 2015] to an average of 10.4%.” Ten percent — the magic number you will likely hear whenever you ask how much of your revenue you should spend on marketing. But is that true for everyone? What about a company in its growth phase vs. a well-established brand like Apple? Is 10% really the magic number and if so, what does a 10% investment in marketing get you in ROI?

According to a 2014 CMO survey published by the American Marketing Association and Duke University, companies with:

  • less than $25 million in revenue spent an average of 11% on marketing
  • $25-$99 million in revenue spent an average of 9% on marketing

The study also broke down the averages for marketing investment as a percentage of revenue by business type:

  • B2B Product Businesses: 10.6%
  • B2B Service Businesses: 10.1%
  • B2C Product Businesses: 16.3%
  • B2C Service Businesses: 10.9%

So while the 10% number may be right for some businesses, it is definitely not a one size fits all figure.

- See more at: https://vtldesign.com/inbound-marketing/content-marketing-strategy/percent-of-revenue-spent-on-marketing-sales/#sthash.nMD6wFbN.dpuf
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