Real-World Education for Modern Marketers

Join Over 602,000 Marketing Professionals

Start here!

Know-How Exchange

Topic: Other

Search more Know-How Exchange Q&A from Marketing Experts

This question has been answered, and points have been awarded.

Marketing Budget As A Percentage Of Revenue

Posted by Anonymous on 125 Points
Is there a typical percentage of yearly revenue for a marketing budget? In other words, should the marketing budget be 2% of revenue? More? Less?

I need to know if there is a commonly accepted percentage.

Thank you!

Bob

  • Posted on Accepted
    This varies from industry to industry. In Industrial wholesale distribution the percentage was very close to a half percent of the top line.
  • Posted by Jo Masterson on Accepted
    I try to use 7-10% of revenue as a starting budget (what we accurately spend varies), and we count marketing staff costs in this budget... hope this helps.
    Jo
    High 5 Software
  • Posted by MonMark Group on Accepted
    Jo Masterson has hit the target as far as we have always advised our clients. Begin with the 7-10%, put that away, and work from that budget, moving forward with the strategies that have been prepared by you or your marketing consulting group.

    You may only use 2-4% this year, and use 5-8% in other years. The money you have left...roll-over, or add to annual income. If you roll over the amount, you will begin to build a "marketing bank" that can assist you through economic downturns, when you must be even more visible.

    Best to all
    Randall
    WMMA
  • Posted on Accepted
    I thought the calculation was a percentage of sales (projected sales) which is a standard 3-7%, so

    $1,000,000 x (3%-7%) = $30,000 to $70,000 ad budget

  • Posted on Accepted
    i belive the budget should be flexible. it totaly depends on your product/service. infact marketing a service good is not only difficult but budgets could be very little to very high. like my org spends less than 1% on marketing (education group).
    likewise the telecom industry(pakistan) is keen on spending a lot more than 7% figure, on average, they are spending 15-20%.
    agreeing with most of them one should look at the sales revenue and also the increase in percentage in last 3 years sales, atleast. this will help you in planning the marketing budget as well. decrease in sales is also taken postively, and it should, a good example would be Paktel Telecom one of the first telcom companies in Pakistan. in the last 3 years they have had the lowest sales and the higest marketing budgets with in the industry to pump up and create a new driving force amongst its exisiting clients to maximise usage.
    you must be in synergy with your strategic dept as well to where do they want to take this. It is flexible game, some times you dont spend at all and the results are just great. budget depends on marketing stratgey and goals not the other way around.
    kamil


  • Posted on Accepted
    The standard calculation can get you to a starting point where you can tweek the numbers plus/minus as you feel is appropriate.

    The standard calc just gives you a general starting point to begin. (see above).
  • Posted by mgoodman on Accepted
    Steve Alker is right: this is getting absurd. Marketing spending as a percentage of sales is a totally irrelevant number. Do NOT provide that number to your management or anyone else, unless you want to demonstrate your lack of understanding of marketing.

    Any number anyone gives is an average. There's a great answer from ASVP/ChrisB at a very similar question
    Posted by mgoodman on Accepted
    Steve Alker is right: this is getting absurd. Marketing spending as a percentage of sales is a totally irrelevant number. Do NOT provide that number to your management or anyone else, unless you want to demonstrate your lack of understanding of marketing.

    Any number anyone gives is an average. There's a great anecdote about averages from ASVP/ChrisB. It was, by the way, in response to a question almost identical to yours.

    I am reminded of the researcher who found the Average Australian has one testicle. This is apparently because roughly half of all Australians have none, while roughly the other half have two, you see.

    So what does that tell us about the Average Australian? Not a lot, except perhaps that a man who has suffered the loss of a testicle in a croc-hunting accident, or when attacked during surfing by a Great White, is on one measure alone, still pretty average.

  • Posted by Mushfique Manzoor on Accepted
    hi there

    some great posts by both Steve, micheal, kathy and randall.

    let me give another angle to look at marketing budget.

    you have mentioned that you are launching some new line extensions in 2007. how do you measure in which segment you are gonna launch the new variants?? the segment that has high attractiveness with low or high capability; those with low capability you build the business/brand, while with high capability you cash-in on the business/brand.

    accordingly your marketing spending should be different for each of these 2 segments; a substantial budget for that brand/business you want to build, and moderate budget for cash-in brand/business.

    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.

    as you can see, your marketing budget should actually vary depending on your segment. although, as others said, it varies from industry to industry; ideally it should vary according to the segment in which the brand/business is operating and also as per Product Life Cycle.

    hope this helps.

    cheers!!
  • Posted by mgoodman on Accepted
    I would add to what Steve said that the amount of marketing spending (absolute and percentage of sales) will depend most importantly on what the objectives are.

    If you're milking a brand and it's a cash-cow, you might spend less. If you're trying to grow in a highly competitive market, you'll spend more. If the brand is a loss-leader of some kind, then you might even spend more than all of your profit (for that brand).

    And the averages include brands with all kinds of objectives, so looking at averages -- even in the way Dan suggests -- is more likely to be misleading than not.

    Of course, if you don't mind using the data to accomplish an objective without regard to the appropriateness, then why use an average? Use the minimum or maximum that will help prove your point.

Post a Comment

Most Popular

MarketingProfs uses single
sign-on with Facebook, Twitter, Google and others to make subscribing and signing in easier for you. That's it, and nothing more! Rest assured that MarketingProfs: Your data is secure with MarketingProfs SocialSafe!