Marketing Budget: How Much Should I Spend?
Sunday June 29, 2008
Every week I receive questions regarding how much to spend on marketing. Determining how much of your resources to marketing within your company can be one the biggest obstacles that businesses face. It can also be a key component that can make or break a business. There are guidelines that will help in allocating your resources, learn what I recommend when it comes to marketing budgets.
How did you determine your marketing budget and has it been successful for you? Why or Why not?
i strongly (not)agree.
a marketing budget cannot be the same in different industries.
for example, cosmetics cost a few cents, are sold for tens of dolars because of their huge ‘investment’ in marketing. the same goes with sports apparel. a branded pair of basketball shoes may cost a few dollars but since they have to pay for the advertising and sponsoring, are sold for hundreds (and also because the market is willing to pay all that money… that is another story).
on the other hand an almost monopoly company needs to spend only a small % on marketing, and that only for branding purposes, and usually to keep people from screaming ‘MONOPOLY’!
as a conclusion, every company must first find its industry average of marketing % to sales and follow that. the tricky point is to invest that money better that competitors.
Nikos, that is why it’s a percentage of a budget not a set dollar amount, because sales vary industry wide.
Great info =)
I agree with you both. Yes every industry is different but as someone who gets asked a similar question on a regular basis I can see why Laura sets figures. People need figures and guidelines. 20% is the norm in many industries.
The important thing here is too make sure we all test and measure the results of every cent we spend on marketing. Cause let’s face it if a business can see that their marketing is making them money why wouldn’t they want invest more money in marketing.
How can you evaluate or measure the effectiveness (financially) of your adverts.
the question was what % should be the budget and close answer is minimum atleast 20-23%, still depends upon industry and product.
The answer to how much money one should budget for marketing is “Yes!”
If someone asks how much, it tells me they do not have a business plan or have not completed it. A very important part of a business plan is the marketing section and the costs associated with where, how, how often one wants to or needs to reach their potentail customers.
For a new business it is a “guestimate” of what should be budgeted. The budget will vary by which formats they have chosen for their marketing mix they plan. This is what will drive the amout to be budgeted. The total will differ depending if is local or regional or national market the business is trying to reach. While there are ways to reach regional and national markets, the further the business is from its potential customers, the higher the cost of reaching them.
Many existing businesses never set a marketing budget and now they are asking how much of their income they should spend for marketing. Again, it is where are those the business is trying to reach that calls for investigating the costs for reaching them.
Remember, it is not how much one spends, it is how judicially the money is allocated.
Lastly, one can find out what the average markeing budget is for their type of industry and size of business. However, these averages are for mature businesses and, really, are not realistic for a new business. They are, though, a goal to shoot for when your business becomes mature.
http://dansmarketing.com
It is all a game of proportions and variables true to to the context of the said business.
Usually as one of you has said, if your business has a strategic plan, it is easier to know at what stage of growth you company is and this what amount of marketing emphasis it needs, leading you to know what kind of marketing investment to make and that, of course would now determine your marketing budget.
In business in general, your resource allocation should match your current sitaution and growth intentions with your external environment
The marketing budget is such a touchy subject because with so many small business owners, marketing budget is usually an after-thought and it is the first thing to go when money gets tight.
I don’t think there is a set percentage. I have helped businesses build plans that were as low as 5% and as high as 60%. It really depends on the industry and what the business is trying to accomplish.
Another thing, this percentage should change at least from year to year if not month to month. Small business marketing plans should be reviewed as often as possible to head off any possible problems.
Make no mistake. There’s only 2 main criteria for setting a budget for small business. What is measurable, what is the GP%
Once you are measuring your marketing, you can see what is working and what is not. If you are getting 10-100 times your ROI, why would you set a budget at all?
The skies the limit.
If you are loosing money on it, modify or stop.
It’s bad math to put a percentage amount without stating the GP%. What if GP is only 30%? Do you still spend 60% on marketing?
The fastest way to go broke in small business is to do marketing without doing the maths. Good marketing cannot replace bad maths. Especially in small business.
Sharon Tieman.
http://www.madamemarketing.com
In my experience, very few small business owners use any sort of equation to decide their marketing budget, nor do they have a system in place to track the money they do spend.
Articles like this are at least a good start in getting small business owners to take a deeper look at what they are spending, where and how they can verify the results. For ideas on taking these actions a step further, check out our .