I did some internet research on this topic. The answers were varied. I've documented some of my findings below along with the link to that original research ( Warning: links could be expired if the source takes it down!)
Deciding how much to spend on marketing, is kind of like deciding how much to spend on food. You can eat hot dogs and canned beans and not spend too much and still feel full. Or you can order caviar and lobster and feel full: costs a lot! Buy at Aldi's: bag it yourself (in fact bring your own bags) and it's pretty cheap. Buy your groceries at Dean and DeLuca: elegant and pricey (in my opinion!)> But that depends also on your own perspective. Kind of like how you might judge artwork: one person's masterpiece is another's yawn. Beauty is in the eye of the beholder.
Here are some interesting tidbits that I found from "experts" on how much to spend on marketing.
Keep Reading: Comments from the professor who wrote the text book on this are at the end!
• the U.S. pharmaceutical industry spent 24.4% of the sales dollar on promotion during 2004.
-PhD candidate Marc‐André Gagnon, along with Joel Lexchin, a long‐time researcher of pharmaceutical promotion, Toronto physician, and Associate Chair of York University’s School of Health Policy & Management in the Faculty of Health.
http://www.sciencedaily.com/releases/2008/01/080105140107.htm
http://www.sciencedaily.com/releases/2008/01/080105140107.htm
• 20% of your resources
• I think 4 to 8% of desired gross revenue is a good range to consider.
-Kevin Stirz, consultant frequently quoted in Business Week, Smart Money, Boston Globe, etc, http://www.allbusiness.com/marketing‐advertising/strategic‐marketing/3875113‐1.html
• 3‐5% of projected revenues for start up, and 2‐3% for maintenance
-Michele Golden, a marketing executive with her own blog like me http://goldenmarketing.typepad.com/weblog/2007/09/plan‐your‐marke.html
• 3% of annual sales and look at it as an investment not a cost. So when something “works” and generates additional revenue then you should reinvest that new revenue in your marketing fund.
-Bob & Susan Negen,
Marketing Your Retail Store in the Internet Age,
©2007 John Wiley & Sons
• You can market effectively with any size budget‐in 1987, the average US business invested 3% of its total sales in marketing.Marketing Your Retail Store in the Internet Age,
©2007 John Wiley & Sons
-Jay Conrad Levinson,
Guerrilla Marketing Attack, New Strategies,
tactics & weapons for winning big profits from your small business,
©1989 Houghton Mifflin Company
•It all depends on what a company wants to accomplish ‐ what marketing goals and objectives it seeks to achieve. If a company is launching a program or ready to impact in a new market, marketing costs should be significantly higher. If the company is maintaining a marketplace presence, expenses should be lower. A marketing budget is a reflection of what is to be accomplished.Guerrilla Marketing Attack, New Strategies,
tactics & weapons for winning big profits from your small business,
©1989 Houghton Mifflin Company
-John Graham, Marketing Consulting since 1976 through Graham Communications
http://www.allbusiness.com/accounting/budget/508610‐1.html
• A good rule of thumb is at minimum of 4‐7% of your gross sales. Some marketers recommend as much as 10%http://www.allbusiness.com/accounting/budget/508610‐1.html
Drew McLellan, Small Business Branding,
http://www.smallbusinessbranding.com/935/how‐much‐should‐you‐budget‐formarketing/
• In 2006 Coca Cola spent $1.893 billion worldwide up almost 8% from 2005. Spending in the US alone for 2006 was at $487 million. It was in the no. 12 spot and spends about 13% of net operating revenues on marketing.http://www.smallbusinessbranding.com/935/how‐much‐should‐you‐budget‐formarketing/
-Advertising Age Magazine’s annual report on the top 100 Global Marketers,
• Procter & Gamble is the number 1 Global Marketer. In 2006 with $8.5 Billion in expenditures on $68 Billion in sales: P&G spent 8% on marketing. P&Gs net sales in 2008 was $83 Billion and they increased their marketing budget. They averaged 10% on marketing over the past 10 years. “We invest more in innovation and marketing support than any other consumer products company”
-2008 P&G Annual Report
The Last Word:
Dr. James R. (Doc) Ogden, Professor of Marketing, Kutztown University of Pennsylvania, Kutztown, PA, who actually wrote the book on the subject of integrated marketing communications said, "Typically a consumer goods firm spends around 3-5 percent (%) of total SALES on marketing. Oftentimes, however, there is additional investments in advertising and other aspects of Integrated Marketing Communications. My personal recommendation is to use an "objective-and-task" budgeting method. With this type of system you invest in your marketing based upon what the costs of the "TASKS" will be. By using a percentage of profit or percentage of sales, you're spending money you may not have to and often you're spending in the wrong areas."
Summary:
So, to decide how much to spend on marketing and/or advertising, you first need to look at what you want to accomplish, and then figure out how to get there and what it will cost. It may take some money just to accomplish that, unless you do it yourself. Even so, how much is your time worth? Maybe your time would be better spent on other tasks and assign the task of figuring out how to accomplish your goals to a marketing firm that has experience and expertise in certain aspects of marketing.
Even so, there are many paths to the top of the mountain: you can walk, bike, or drive. Some paths are scenic and some are clearcut 5-lane highways. If you want to get there in a hurry, charter a helicopter, but it's going to cost you!
Dr. James R. (Doc) Ogden, Professor of Marketing, Kutztown University of Pennsylvania, Kutztown, PA, who actually wrote the book on the subject of integrated marketing communications said, "Typically a consumer goods firm spends around 3-5 percent (%) of total SALES on marketing. Oftentimes, however, there is additional investments in advertising and other aspects of Integrated Marketing Communications. My personal recommendation is to use an "objective-and-task" budgeting method. With this type of system you invest in your marketing based upon what the costs of the "TASKS" will be. By using a percentage of profit or percentage of sales, you're spending money you may not have to and often you're spending in the wrong areas."
Summary:
So, to decide how much to spend on marketing and/or advertising, you first need to look at what you want to accomplish, and then figure out how to get there and what it will cost. It may take some money just to accomplish that, unless you do it yourself. Even so, how much is your time worth? Maybe your time would be better spent on other tasks and assign the task of figuring out how to accomplish your goals to a marketing firm that has experience and expertise in certain aspects of marketing.
Even so, there are many paths to the top of the mountain: you can walk, bike, or drive. Some paths are scenic and some are clearcut 5-lane highways. If you want to get there in a hurry, charter a helicopter, but it's going to cost you!
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