Know-How Exchange : Research/Metrics

Hi,

Do see previous MarketingProfs Q&A on the subject:
https://www.marketingprofs.com/ea/qst_question.asp?qstID=25067

Note both the information on 'marketing as a % of revenues' as the caveats. What do you want to use this information for? For your own organization, a task-and-objective method may be much better in coming up with the appropriate budget

Cheers

koen

Thanks to koen for referencing this past information.

I would also add that "marketing budget" is a loose definition. The items you may include in this are likely different from other organizations, which also may vary by size, so any comparison could also be misleading for that reason. Additionally, many organizations don't consider "hidden costs", such as time consumed by resources needed for online initiatives. While these are not necessarily out-of-pocket, they are costs that should be considered as part of any marketing plan.

There is no good answer to your question. Even if there were a way to calculate the number, it would be meaningless.

First, as Joy points out, not every company defines its marketing expense the same way. Some include sales or distribution costs, some don't. Some include marketing overhead, some don't. Etc.

Next, the range is enormous ... from less than 1% to something approaching 50%, or even more. The percentage is a result of two numbers that don't always track together.

Third, different companies -- in different industries or even in the same industry -- have different objectives and competitive needs. A new company with no sales may be spending MORE than their annual sales -- maybe as much as 1000% or more -- while a mature company spends only 5%. What's the average? Other companies may be trying to grow market share (and spending a lot more than a competitor that is coasting).

Finally, even if you had the answer what good would it do? Surely you wouldn't make a decision about what is right for your company (or any company) based on those ratios. You don't take ratios to the bank.

Best approach: (1) Determine your objective; (2) Develop a marketing plan that will deliver the objective; (3) Figure out how much it will cost to implement the marketing plan.

If the total cost is more than the objective is worth, you have two options: You can develop a less expensive marketing plan that may have some greater risk involved (i.e., might not deliver the objective); or you can revisit the objective and see if it's realistic and worth the likely cost to achieve it.

In either case, the ratio of your marketing cost to sales is irrelevant.