Question

Topic: Advertising/PR

Budgeting For Marketing Communications

Posted by Anonymous on 1/7/2005 at 9:03 PM ET 250 Points
I'm an advocate of zero-based budgeting. However, when ever a client is asked what have they set asside for their annual budget, I typically get a question in return: "How much do you think we should budget?" Are their any relatively current study results that can help answer this question in the business-to-business world, which is based upon a company's annual revenues and by the business type, i.e. Warehousing and storage; Manufacturing; Distribution; Services, etc.? If so, what are the findings?

Thanks for your consideration.

Dave
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RESPONSES

  • Posted on 1/7/2005 at 10:48 PM Accepted
    Randall's experience parallels mine. Those would be my numbers. But there are some notable exceptions. For example, when there's a consumer pull strategy for a B2B brand/product, the percentage can reach as high as 10-12%.

    A couple of examples that come to mind: "Intel Inside" and "DuPont Certified Stainmaster." I was involved in both of these (a while ago), and they both were such effective campaigns that the respective companies kept increasing the spending pressure ... because it was driving their market share, helping them hold premium pricing, and ultimately making them more money.

    I don't remember the precise $ or % spending numbers, but I'm pretty sure they were both in excess of 10% of sales ... including co-op advertising, point-of-sale materials, etc.

    Net, 3-7% is a good rule of thumb, but there are cases where it can be substantially greater. Rarely is it less, unless the manufacturers/marketers have given up and begun to treat their products like commodities.
  • Posted by ReadCopy on 1/11/2005 at 5:38 AM Accepted
    Like you I hate rule of thumb budgetting, but agree that it is sometime necessary.

    B2B is obviously the poor relation, in terms of budget allocated when compared against B2C for example. if pushed, I always suggest a minimum of 1% of revenues as a marketing budget, but in my experience prefer to work around the 3% marks (depends on what retainers, salaries etc you need to account for in the budget)
  • Posted by telemoxie on 2/5/2005 at 12:02 PM Accepted
    If I were planning a meeting with company X, and had reason to believe they would ask me how much they should budget for advertising, I would do my best to find out how much their competitors were budgeting for advertising. If I could get specific information on competitors (if they are public companies, download their financials) - if I could not get specifics on individual companies, I would get reliable industry specifics for others in their industry.
  • Posted on 2/9/2005 at 3:13 PM Member
    It should go without saying that the amount a company should spend on marketing is a function of their objectives. If they are in aggressive growth mode, or if they're under attack by new competition, they'll need to spend more. If they own the market and they have a true "cash cow," a maintenance budget would be more appropriate.

    That's why rule-of-thumb percentages are meaningless. The real answer is "It depends on what you're trying to accomplish."
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