Building Marketing Budgets

What Percent of Your Revenue Should You Spend on Marketing?

While most companies spend between 2-10% of revenues on marketing, there is no firm rule. For instance, while some companies spend only 1%, others will spend up to 50% (when launching new products).  Generally, consumer product companies need to spend more on marketing than B2B companies as B2B companies can be much more targeted and efficient in their marketing. B2B companies generally spend 6% or less, while consumer product companies generally spend between 7 and 12%.

What your competitors are spending on marketing and what you can afford will affect how much you spend on marketing. Products and services sold in high traffic, high visibility locations will not need to spend as much as products and services that are less accessible. You will need to spend more if you are a new entrant in a category, are launching a new product or are trying to aggressively gain market share.

The best way to build a marketing budget is from the bottom up, starting with your target audiences and determining the most effective and efficient ways to get to those audiences. Ideally, you will want to achieve maximum reach and frequency in your messages using the optimal combination of marketing approaches, vehicles and media. Depending upon your product category, any of the following might be in your marketing mix: advertising, direct marketing, web sites, Internet marketing, social media, PR, promotion, events, sponsorships, collateral materials, trade shows, trade relations, product placement, catalogs, selling scripts and other sales support.

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