Know-How Exchange : Research/Metrics

fhtrx,

Why do you need it?Selling spending including or not?
You will find enormous differences as per industry and as per company in each industry.The average will tell you nothing.You will find some companies spending 3% and some close 10 % of their revenues.
If ever you should look more at companies of your industry,stature and market position to size you up in this respect.

Adam

You're going to get a lot of answers that say looking for an industry average is wrong-minded, and I agree with that. Far too many variables in there. In fact, and allow the cynic in me to show through here, those numbers are generally used by ad agencies to pump up their clients' budgets.

Consider your question to begin with . . . B2B and B2C are not industries . . . they are, a generic description of the broadest of markets. Hotels and laundry detergent are both B2C, but they clearly have different markets and different ad budgets.

Second, such averages are usually compiled by talking to the biggest of companies--and Microsoft's and P&G's and Toyota's marketing as precentage of revenue numbers are irrelevant to a $5M company.

Third, what do you mean by marketing budget? Ad spend is what people usually mean, but that is hardly marketing, and many companies don't advertise at all.

Fourth, spend is going to differ within a company from product to product. For instance, Bose spends something like 20% of revenue for advertising on product A, and 50% of revenue on product B. It is bad statistics to then presume that their average spend is 35%

Do this instead.

1. Figure out who you want to reach with whatever it is you sell--assuming this is not just an academic question and you are with a company that has a product.

2. Determine what it will cost to reach that marketplace with a marketing initiative . . . figure in the strategic and tactical side of things: Consultant costs for things like pricing if you need it, trade show, print ads, and so on.

3. Ask yourself if you can afford that cost.

4. If yes, spend the money. If no, go to step 5.

5. Eliminate items from the list of marketing elements you want to use . . . until you hit a budget figure you can afford.

That's your marketing budget.

I know, people need some kind of benchmark to give them comfort when spending, but to approach marketing budgets this way does more harm than good.

The average percent is so meaningless as to be absurd. The range is from 1% (or less) to something over 50%. Even if you had the number, it's totally useless ... perhaps even counter-productive, because the amount YOU need to spend depends on YOUR objectives, not on the "average" objective.

If I told you that the average temperature in the world today is 63.7 degrees Fahrenheit, would you know whether to wear shorts or a parka when you go outside tomorrow? Of course not.

You need to listen carefully to the posts above and spend what it takes to deliver the objectives you've set for yourself. If you can't afford that, then adjust your objectives. If you shoot for a percentage you're (a) just fooling yourself, (b) chasing the wrong target, and/or (c) going to end up with a marketing plan that will almost certainly be sub-optimal.

Ah yes, the old chestnut of the average spend.

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.

More to the point, I think, is the range of spends that might be occurring in relevant industries and businesses.

Even more important for you to consider - is how much the subject business needs to - and is able to - spend. And that depends entirely on its circumstances.

An upstart breaking into an established market may need to spend big in order to secure its target share.

An established player may need to spend much less to maintain its brand, and probably in different areas. Loyalty rather than awareness.

I don't think there's a better approach than looking at the "first principles" and how they apply in each case.

Hope this helps.

ChrisB

I think there are many valid ways to approach this question, and you seem to have some good advice above...

... this question has been posted many times before, and I'm always wondering why folks want that number. It seems to me that info might help us recommend a course of action.

I'm wondering - are you:

- A marketing manager trying to justify your existance?
- An ad agency trying to make a sale?
- A bean counter trying to cut expenses?
- A sales manager pushing for more hot leads?
- An ad agency sales person trying to select your market?
- An industry analyst evaluating public companies?
- A CEO trying to position your company for the long haul?
- A job hunter looking for your next job?

For example, if you are a marketing manager trying to justify your existance, you might find it helpful to try and get estimates or info on the activities of your competitors.

If you have some other specific need - if you can let us know more info about what that need is, we can probably provide even more information, or maybe we can suggest other ways to solve your specific problem or issue.

Hi

We’ve covered the pointlessness of these kind of percentages many time before, but what the hell, many august institutions publish all kinds of “interesting” statistics that benefit no one apart form the wonks who research them and the twits who tell them to carry out the research.

My country’s National Health Service is awash with performance targets and percentage achievements of Government indicators, but there isn’t a single one which helps me to get a broken leg fixed more quickly or one which can show a doctor a better way of saving someone’s life. They do however keep a small army of statisticians in employment, spending my tax money which could be used to pay for a few additional operations, to produce a lot of figures. Figures which are then used to fire people who actually deliver the healing bit of the health service because they dared to put a patient’s life before achieving a target.

So if you want the figures, they are probably compiled by some idiot in government for the purpose of berating private industry for not doing enough of, or doing too much of, something that a civil servant wouldn’t understand if you dropped a bag of it labelled “marketing activity” on his head.

Here’s another reason why these figures are total tosh. The percentage spend on marketing for a given company, never mind a given sector, will be dependent on their strategy at that moment. This will be dictated by the tactics they are deploying to achieve their strategy.

Thus if they are driving towards growing their market share, their marketing spend as a percentage of turnover is likely to be large. If at a later stage in their strategy, they are aiming to grow profits, marketing might be ruthlessly cut for a time whilst they reap the benefits of the latency of previous campaigns.

At another time, they might be fighting off a takeover and decide to embark on extensive and expensive corporate marketing to win over the city, whilst at other times, they might be keeping very quiet on the marketing front as they divert their resources into a top-secret new product which will take the world by storm and require little formal marketing because every newspaper in the world will give it a page or two for a week because it’s so damned newsworthy.

So what then are you going to conclude about a single company whose % spend on marketing over 8 successive quarters is 3%, 2%, 6%, 1%, 12%, 8%, 0.01% and 9%?

According to Douglas Adams, who was deeply into trashing marketing and still got most things right, the answer is 42.

Steve Alker
Unimax Solutions