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Marketing Budget Benchmarks
Posted By: S. Yoder on 8/17/2004 11:52 AM (CST) 250 Points
What's an appropriate guideline for the Marketing Budget of a $2.7 billion financial institution? Obviously, that depends on the specific corporate objectives, but I'm talking "in general."

I've seen a number of benchmarks: 4%-5% of operating expenses, 3% of total operating budget, 1% of assets, 1.5%-4% of gross income. I'm not sure who makes these recommendations, but I'd like to know what reliable organizations with marketing expertise recommend. Can you help?

Posted by: kristen* Accepted Answer
8/17/2004 1:01 PM (CST)
Dear Syoder,

My experience is that the marketing budget should be about 2% of the annual sales of the company.

K. Crump
 
Posted by: psimone Accepted Answer
8/17/2004 5:47 PM (CST)
Dear Syoder,

Intriguing question, that can best be answered with "it depends." It depends on lots of variables (as I'm sure you know) but I'd say the best off-the-cuff response would be around 3% of your gross income, because of your specific industry.

P. Simone
 
Posted by: Peter (henna gaijin) Accepted Answer
8/17/2004 8:42 PM (CST)
Here are a few articles on the subject.

http://www.score.org/m_pr_11.html

http://www.killianadvertising.com/wp10.html

On the whole, I think you will find there is no best number that anyone can say for your business.
 
Posted by: SRyan ;] Accepted Answer
8/18/2004 7:01 PM (CST)
I've seen some SEC filings and financial reports for companies that include their breakdown of spending on marketing. I've never looked one up for a financial institution, though... but perhaps you could find similar reports filed by your COMPETITORS to do more than just set a benchmark. You should be keenly interested in seeing the difference in budgets for the whole spectrum of winners/losers in your industry.

And of course, I can't stop myself from suggesting that you try the Search Questions link here and use the keyword "budget." I know some Q&A threads have addressed this question (but not necessarily for banking).

¤ Shelley ¤
 
Posted by: Mushfique Manzoor Accepted Answer
8/19/2004 7:55 AM (CST)
Hi syoder

echoing simone, the budget depends on a lot of factors. i would a say for a Fin Inst of $2.7 billion, the marketing Budget should be at least 5% of revenue.

then again this all depends on the market scenario. if your competitors (depending on their market share) are spending more than that percent, then you also have to match to maintain your position, if not increase.

hope this helps

cheers!!
 
Posted by: S. Yoder Author Response
8/22/2004 3:48 PM (CST)
Thanks everyone for your quick response. I might note again that I work for a financial institution, in fact a credit union. Measurements in terms of "sales" or "revenue" really don't make sense in my industry.
 
Posted by: jaccog* Accepted Answer
8/26/2004 6:59 AM (CST)
Sorry to say those are indeed McKinsey benchmarks if I'm not mistaken:
5% of total year revenue, of which on average 20% should be for branding

Setting budgets should always be about targets. What are your targets and what do you need to achieve those ?
Then if you have the approximate budget check it financially, are you doing sound business by investing the budget ? What would happen if you would invest more, less or even nothing ?
Now you have the scenarios it's time for chosing.

Benchmarks do not do you much good, what if your competitor is investing twice or half the amount of money that you are using ?? If your strategy is the right one, it doesn't matter...

Good luck

Jacco
 
Posted by: kwinters* Accepted Answer
8/26/2004 10:39 AM (CST)
syoder,
My name is Kevin E. Winters, I am a loan officer and director of marketing for a community bank in TX, $265MM. Valerie forwarded your question to me so here goes my best....

The ABA book titled Marketing Financial Services handles it very generally but here is how they do it....

"The marketing budget for a bank generally includes expenditures for five activities...
advertising, sales promotion, marketing research, sales/service training, and pr."

"How much should a bank spend on marketing? While there are no rules of thumb, some data indicate that larger banks (1B-5B) spend about $574 per million in assets....the same report indicates that smaller banks (250MM-500MM) spend about $811 per million"

"How banks of various sizes allocate total marketing dollars...

Assets $100-250 $500-1B 1B-5B
ad 51% 66% 59%
pr 26 19 21
sales promo 16 8 13
training 3 2 4
research 2 2 2
other 1 2 1

source: 1996 analysis of bank marketing expenditures(bank marketing association, 1996)"

Our bank has about $265MM and we spend about 100k year on marketing including all the things above and charitable donations...

this information comes from marketing financial services, by Pezzullo, put out by the aba it is worth your money to get it....

hope this helps...

If i can do anything else, just click my profile (kwinters) (I used to be in the top 25, don't know if I still am) and email, I am glad to help...


kwinters
 
Posted by: thinkmor Accepted Answer
9/3/2004 12:26 PM (CST)
Hi Syoder

This article may help:

http://advice.cuna.org/research_review/research_review_01.html


Hope it helps you.

Zahid
 
Posted by: Val (Moderator)* Moderator Response
9/9/2004 3:54 PM (CST)
Hi all. I am closing this question since it's been open for more than 10 days and seems to have lost its momentum. Thanks, Kevin, for responding to my request! As usual (when I close questions for authors), I split the points among all the contributors to thank you all for participating.

Best wishes,

Val
 


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