Question

Topic: Other

Benchmarking Marketing/sales Costs Vs Net Revenue

Posted by tburke on 4/8/2014 at 8:32 PM ET 125 Points
Smaller, consumer product company, high-end Gift ware/Tabletop/Flatware/Crystal -
looking for some benchmarks with respect to sales/marketing costs as a % of net revenues. Also, benchmarks with respect to distribution costs/transportation/sourcing/General Administrative costs.
To continue reading this question and the solution, sign up ... it's free!
SUBSCRIBE
Or, SIGN IN

RESPONSES

  • Posted by mgoodman on 4/8/2014 at 9:38 PM Accepted
    A "benchmark" is generally the average of "similar" companies. And each company's input depends on that company's goals and strategy. For example, a new company might spend more than it makes for a few years to establish itself in the market ... with slotting fees, distribution allowances, etc. ... while an old, established company might be milking the business and spend the absolute minimum on marketing and sales.

    The range can be pretty wide. Some companies spend 1-2%, while others spend 50% or more. And most are somewhere between those extremes. Even if you knew the average, what good would that be? How would it help you?

    There's also the issue of what's included in sales/marketing costs. Some companies include sales salaries and commissions; others don't. Some include brand managers' salaries; some don't. Some accrue coupon redemption costs; others don't. Some amortize slotting fees; others don't.

    So if we told you that the average is 7.5%, what would that mean to you? (Who knows if it's 7.5% or any other number?) How would you use the "benchmark" if we could provide it?
  • Posted by tburke on 4/8/2014 at 9:44 PM Author
    ok, thanks. I was thinking that while it would/could vary significantly, for an established company, with an established product line, that 10% or so would be about right. The Company has a GM of 32%, so with 10% for marketing and another 10% for G&A (including distribution) that leaves an operating profit of over 12%. the problem they have, is that marketing/sales are running 19% so not much left for operating profit.
  • Posted by mgoodman on 4/8/2014 at 9:51 PM Moderator
    But if volume would drop precipitously with reduced sales/marketing support, maybe 19% is what's necessary. There's no rule that says every company has to make a profit forever. Or maybe the company needs some fresh, outside-the-box thinking to restore profitability. Or maybe this is a sign that its pricing strategy is flawed and prices are too low. Or maybe G&A is too high. Etc.

    Benchmarking won't solve this problem ... even if it were easy/accurate.
  • Posted by tburke on 4/8/2014 at 9:55 PM Author
    Thanks, yes numbers can tell you any kind of story and you can get the numbers to say anything.
    I just wanted some comparisons so that I could show the client.
BACK TO TOP

Post a Comment

Related Discussions

Community Info

Top 25 Experts
(Other)