How	  Much	  Should	  I	  Budget	  for	  Marketing?	                           ...
Marketing	  saw	  small	  companies	  drop	  their	  spending	  to	  an	  average	  of	  3%	  of	  sales,	  whereas	  medi...
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How much should i budget for marketing?

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One of the challenges small- to medium-sized companies face is how much to spend on marketing. You know that marketing is important, so the question becomes how much investment to make when it can be difficult to pin down a concrete return on investment (ROI). This document helps guide you through how to budget for marketing.

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How much should i budget for marketing?

  1. 1.   How  Much  Should  I  Budget  for  Marketing?   November  and  December  is  not  only  known   for  the  holiday  season,  but  also  for  budget   planning  for  the  upcoming  year.  One  of  the   challenges  small-­‐  to  medium-­‐sized   companies  face  is  how  much  to  spend  on   marketing.  You  know  that  marketing  is   important,  so  the  question  becomes  how   much  investment  to  make  when  it  can  be   difficult  to  pin  down  a  concrete  return  on   investment  (ROI).   While  TREW  Marketing  does  not  have  a  hard   and  fast  rule,  our  past  research  has  shown  a   good  starting  point  for  B2B  technology   companies  is  6%  to  14%  of  forecasted  sales.   From  there,  that  number  will  need  to  be  fine-­‐ tuned  based  on  several  considerations:   1)  Margins  The  higher  your  margins  are,  the  greater  your  ability  to  reinvest  in  the  company.  However,  even  businesses  like  computer  manufacturers,  who  tend  to  have  razor  thin  margins,  must  still  invest  in  marketing  to  be  competitive  in  the  marketplace.  2)  Products  Versus  Services  Your  core  services  may  not  change  very  frequently,  and  therefore  once  the  foundational  marketing  material  is  created,  less  updating  may  be  needed  from  year  to  year.  In  contrast,  every  time  you  release  or  make  a  major  update  to  a  product,  fresh  content  –  such  as  news  releases,  landing  pages,  data  sheets,  and  demos  –  must  be  created  and  maintained.  3)  Foundational  Marketing  Investments  An  increase  in  budget  may  be  required  for  foundational  marketing  projects.  For  example,  let’s  say  your  company  typically  needs  a  marketing  budget  of  6%  gross  revenue  to  meet  sales  targets.  However,  there  may  be  a  year  where  you  need  to  spend  7-­‐8%  in  order  to  pay  for  a  major  marketing  project,  such  as  a  website  redesign  or  a  move  to  a  new  CRM  platform.  These  foundational  projects  will  benefit  the  business  for  several  years  to  come,  making  them  a  longer-­‐term  investment.  4)  Balance  Between  Sales  and  Marketing  Companies  commonly  group  sales  and  marketing  together  in  the  same  budget.  If  this  is  the  case  for  you,  it  is  important  to  decide  who  gets  how  much,  and  consider  where  the  big  versus  incremental  investments  should  be.  For  example,  this  year  should  you  double  the  sales  force  or  double  down  on  marketing  efforts  to  launch  a  new  eCommerce  system?  If  you  don’t  strike  the  right  balance,  you  may  have  lots  of  sales  representatives  with  no  leads  or  tons  of  leads  with  not  enough  salespeople  to  follow  up  on  them.  5)  Healthy  Versus  Slow  Economy  Many  people  have  asked  if  these  budgetary  guidelines  still  hold  true  in  a  recession,  and  the  reality  is  that  many  companies  have  dialed  down  their  spending  in  reaction  to  tough  economic  times.  In  2011,  TREW   Created  by:    
  2. 2. Marketing  saw  small  companies  drop  their  spending  to  an  average  of  3%  of  sales,  whereas  medium-­‐sized  businesses  maintained  an  average  of  8%  of  sales.  MarketingSherpa  has  collected  data  showing  that  smaller  businesses  typically  spend  a  greater  percentage  on  marketing  than  larger  companies,  but  during  recent  years,  small  companies  have  been  going  into  survival  mode  and  aggressively  cutting  expenses  to  keep  their  businesses  afloat.  However,  “marketing  is  an  asset  that  drives  revenue,  not  a  liability  that  simply  incurs  costs,”  says  Inbound  Sales  Network.  Returns  may  not  be  immediate,  so  a  long-­‐term,  consistent  effort  to  market  your  company  and  its  offerings  is  required  even  during  downtimes  to  make  sure  customers  will  still  choose  you  when  business  picks  up  again.  In  conclusion,  make  smart  decisions  and  prioritize  your  marketing  dollars  to  make  the  greatest  impact.  For  more  information  on  which  activities  will  get  the  most  bang  for  your  buck,  download  our  free  Smart  Marketing  for  Engineers  e-­‐book.     Created  by:    

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