Know-How Exchange : Research/Metrics

Any answer we give you will be useless. What could you possibly do with this information?

Each company has its own marketing objectives, and some of those require more investment than others. Some are very people-intensive and some are not. Some have large in-house staffs to manage, while others use independent reps and agencies for most marketing implementation.

What if we said that the percentage spent on salaries is 2%? Or 20%? What if the company is just one or two people and neither one is called CMO? What if the company sells mostly services, not products?

There is no "typical percentage" spent on salaries versus execution. And if there were an average that could be calculated it would be totally meaningless.

I'm struggling to make sense of the question.

There's no point looking for averages in Marketing when comparing the endeavours of a range of disparate organisations.

The answer you seek is going to depend on the size, structure, objectives and revenues of the organisation.

What has really prompted the question? I feel there must be another set of questions behind the question that has been asked.

Are you trying to work out what is a reasonable amount to pay a Chief Marketing Officer VP-M, Director of Marketing, etc?

Or are you trying to work out a reasonable amount to spend on marketing program execution?

The real answer to the question you have asked is:

"There is no typical percentage. The organisation has to budget an amount that will properly fund the fixed costs (salaries, overheads, etc) and the execution of a campaign, set of campaigns, or programs, designed to achieve the organisational objectives".

Does that help? Or do you need help to work out a proper budget?

ChrisB

In addition to what the other two experts said, the answer is also highly dependent upon the person's past experience, education, and what, overall they bring to the table. In other words, it's difficult to assess the value of a person's contribution until more is understood about their background and the contributions he/she will be expected to make to the organization.

Dear rosemary,

Much like the other contributors, I don't have a hard and fast answer.

I do feel strongly that marketing compensation ought to be based on results in terms of higher conversions and sales. No increase or upward change, no pay.

Brutal? Yes. But a huge incentive to get things done and do a great job FOR THE CUSTOMER. When customers benefit, so does the marketing person. Simple. But effective.

So, reading between the lines of your question, and based on what i've just said, it ought to come as no surprise that my opinion is that corporate B2B marketing budgets ought to be spent on marketing—on getting the word and the message out—not on salaries.

I'm sure we've all encountered people on high salaries who don't earn their money and sadly, squeaky wheels in many cases still get the grease.

But what ought to happen—the message that really NEEDS to be not just broadcast but rigidly reinforced—is that wheels that continue to squeak after they've been greased can be replaced!

Ultimately, titles: CMO's, VP of Marketing, Director of Marketing or whatever, don't mean anything. I can call myself the SRTKMU (which stands for Supreme Ruler of The Known Marketing Universe), but if I can't deliver, of what use am I, and how do I justify my salary of 1 million dollars per month?

Answer: "Not much!" and "I can't!"

Sadly, it's much of this kind of thinking got us into the economic poop soup we're struggling to rid ourselves of right now. Massive salaries and over-inflated titles with little, in terms of effective, customer-orientated and solutions focused results, to show for them—and at some point, systems destabilize and down the pan we go. The trick is to recognize the signs and to know when things don't bode well.

I hope this helps.

Gary Bloomer
Wilmington, DE, USA
Follow me on www.twitter.com/GaryBloomer

I basically agree with Gary and the other contributors, but realize you would like to come up with some answer. My limited experience in the one company I have data on is that the salary was 17% of the overall budget. Instead of comparing the salaries to the marketing budget though, he compared the salaries to the market outcome of that budget, i.e. the results of the marketing department (output not input). Because the output was great, the ratio of marketing salaries to marketing contribution was in the low single digits.

The CMO looked at this as the same problem of how much to spend on advertising copy quality versus broadcasting the ad: no matter how much you spend on broadcasting the ad, it won't do much if the copy quality is lousy. To get great programs, he wanted to get the best senior marketing people, which (also) meant investing in their compensation and training.

I totally agree with the above about the pointlessness of this information, but I think that I can guess where you are coming from.

The publication of accurate assessments of marketing spend, return on investment, profit margin, sales salaries and marketing salaries and their associated bonuses is called industrial espionage. Wouldn’t you like to know, but we won’t tell you because it will give you an insight into what we have to bargain with in sales negotiations

If you don’t mind doing the basic work and using maths more normally applied to n-dimensional phase space, then you can infer an answer of sorts. I simply suspect that even companies in the same market and with the same turnover and the same headcount would give you a spread of 1-99% were you to be told the actual figures

For you own amusement, here is a way to calculate the figures.

Firstly determine the turnover of the company and then the gross margin against ex-factory goods.

Determine what resources you need to produce these products and how much it costs. (Plant, people, running costs, capital items etc)

Now determine the net profit before taxation for product leaving the factory and being ready to sell.

Now write a marketing plan based on these assumptions, so that you have a reasonable chance of being able to meet a sales target though the hard work of X people.

Then consult one of the many surveys which give the supposedly accurate range of remuneration for a given job-title in a given market and for a company with a particular headcount and turnover. Just hope that it‘s not written by someone with a creative streak!

Add the salaries of all your players together and you have your executive sales and marketing costs. Now you can compare them to turnover, gross profit, net profit and the dress size of the tooth fairy.

The trouble with the above is that everything is inter-related. Manufacturing headcount is determined by sales. Future capacity is ruled by forecasts. Cash-flow is determined by forecasts and the variable input costs of making things. Sales results depend on how professional your team is and what quality of leads they get. Future sales are dependant on lead-times and profitability is dependent on buying practice, which is itself determined by the volume of sales.

That’s a non-linear feedback system in about 5 or possibly 6 dimensions and I’d need you to have access to Wolfram or MathCAD to show you how they all relate.

If you do the maths (And Proctor and Gambol and Unilever do) you will find several satisfactory solutions each producing a ratio which is utterly different to the others. Common sense allows you do get rid of stupid results from optimisation (Canning the chairman’s Rolls and spending the proceeds on sales collateral will not endear you to job security!

Or you could take the traditional route to finding this out – go to your industry’s biggest exhibition or show where all your competitors gather. Get ratted and blotto with them as usual, but this time get them to talk about their remuneration vs the directors vs their turnover instead of asking if there are any spare jobs going.

If you can remember anything the next day, then that’s probably as good as it gets.

Steve Alker

Xspirt

I will second (tenth) the responses above - percentages like this are pretty much useless. They don't say anything.

Running along what Koan said to try to give you a number so you have something (however useful/less), I found I was unable to do that. Just not numbers I have ever tracked in any company I worked for.