Know-How Exchange : Advertising/PR

Avoid the trap of using industry averages to set your budget.

First, the budget is more a function of what you're trying to accomplish than what other people are spending. If you're trying to increase your market share from 5% to 25%, you're going to have to spend a lot more than if you're trying to grow from 24% to 25%.

Second, there are some things that have an absolute cost, not a percentage. For example, it costs $500,000 (or whatever) to produce a high-quality television commercial whether your annual sales are $2 million or $200 million or $2 billion.

Third, looking at industry averages doesn't tell you very much. There could be two competitors spending 3% and 15% respectively. The average might be 9%, but nobody is average, so what does the 9% figure tell you?

I'd worry more about your objectives and strategies, and what you have to do to accomplish them. Then, if the costs are justified (i.e., there's a payout in the future), go for it. Don't worry about the percentages or industry norms.