Question

Topic: Advertising/PR

Recommended Budget For Advertising

Posted by Jeff K. on 1/18/2007 at 6:42 PM ET 250 Points
Has anyone run across a boiler plate answer to the question, how big should my advertising budget be?

I know that there are a lot of variables associated with this question, like what product/service are you advertising, who is your audience, etc., etc.

What I'm wondering is if anyone has come across a generic number of say 1.5% of gross sales or 3% of net sales or something like that. If so, where did you hear this?

Thanks everyone! I just thought this would be an interesting question for the group to discuss!

Jeff
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RESPONSES

  • Posted on 1/18/2007 at 7:08 PM Member
    We've dealt with this question before. The answer is that there is NO percentage or dollar amount. If we tried to come up with an average, it would be absolutely meaningless -- like the average temperature in the world. What would you do with it?

    The right amount to spend on advertising is whatever it takes to accomplish your objective. If you can't afford that, change the objective.

    The industry and the product/service are not nearly important as the objective. It could be 0.5% of sales or it could be 50% of sales.

    Sorry, there's no meaningful answer to your question. Anyone who would give you a percentage just doesn't get it.
  • Posted on 1/18/2007 at 9:20 PM Accepted
    Randall, I suspect your numbers are for B2B clients. In consumer packaged goods, I've seen numbers 2-3 x what you quote, and even more in some cases. I have a client now who is at 25%, and he's considering going a little higher. (Of course, his gross margins are in the 60+% range, and he's expanding into new geography.)

    Jeff, I don't know why you are asking the question, but my strong advice is to not give anyone a number. The range is just too great, and you're as likely to mislead them as to really address the core issue.
  • Posted on 1/19/2007 at 1:01 AM Accepted
    There was a recent post regarding budget for marketing located at the following link

    https://www.marketingprofs.com/ea/qst_question.asp?qstID=16095

    Donna
    Marketing Riot
  • Posted on 1/19/2007 at 2:30 AM Member
    In Financial Services-Asset Products, the Advtg budgets are upto 2% of the Loan disbursed amount on a quarterly basis.
  • Posted by Jeff K. on 1/19/2007 at 1:42 PM Author
    Mike & All-

    First, thanks for the responses! I started this question more out of curiosity than anything. I had read some book about 6-10 years ago that put a blanket statement of 3% of gross sales as a good figure. I've never stuck by that number and when clients have asked for a number, I've always told them that it depends on what they are trying to achieve.

    Because of the wide variety of experience and industries represented on this forum, I thought it would be an interesting question to pose. I'm not surprised by any of the answers here, but I do want to keep this thread open for a couple more days to see if anyone else has any thoughts.

    Thanks everyone! Jeff
  • Posted on 1/19/2007 at 2:32 PM Accepted
    Jeff,

    While I agree with nearly everything stated in this forum to this point, I would like to give a slightly different answer. It has been my experience that most clients, when presented with 3% of their gross annual sales, freak out...for lack of a better phrase. Think about how big that number looks...i.e. Company A has a gross annual sales volume of $1,000,000...3% of that number is $30,000. What many clients think when they see the math done that way is that you (the agency) are taking $30,000 out of their proverbial pocket.

    Therefore, I sometimes prefer to spend more time brainstorming ideas with the client and really getting a feel for what forums of advertising they seem to prefer. At that point, I will assign some estimated costs associate with those particular forums. A lot of times the total may be right around 3% of their GAS or even slightly higher, but it's broken down by forum which it makes it a lot easier to swallow.

    This approach requires two things: the "right" client and an honest sales approach. The idea isn't to swindle them into spending $30,000, it's to educate them on how much certain advertising forums realistically cost.

    If nothing else, maybe it's just something to think about.

    Cheers,

    Devin
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