There are so many factors companies should consider when thinking about marketing. The amount you should budget will be different based on its position in the marketplace and its industry.
For example, industrial, business-to-business corporations would spend less than 1 percent of their net revenue (total sales) on marketing established products, yet many consumer products companies spend 50 percent or more of their net revenue on launching new offerings.
Remember: You have to spend money to make money.
What should we spend?
Companies should spend around 5 percent of their total revenue on marketing to maintain their current position. Companies looking to grow or gain greater market share should budget a higher percentage—usually around 10 percent. This percentage will vary by company and industry. For example, companies in highly competitive industries—such as retail and consumer products—often spend 20 to 50 percent of their net revenue on marketing.
The end result may be out of the comfort zone for a number of businesses. However, keep in mind that the total budget calculated should cover all marketing expenses: The cost of marketing staff and their overhead, as well as the cost of printing, advertising, and outsourced talent, is included.
Many businesses have failed because they were unwilling to properly budget for marketing activity. Companies can grow to a certain point via word of mouth, but after they hit a certain size threshold, they will stall. Additional factors to consider when developing a marketing budget include new product/service launches, new market entries, and mergers and acquisitions. The percent-of-revenue calculation should be adjusted to account for these factors.
Companies may wonder how much they can expect to receive in return for their marketing investment, fotoand how much an increased investment will garner them in increased return.
There is no easy answer. Some marketing tactics require a longer term than others for effective return. A marketing strategy focused on branding, for example, will need a longer period to see results than a lead-generation strategy. In general, most marketing activity snowballs over time, delivering exponentially increasing return the longer the tactics are underway in a coordinated, diversified fashion that covers the right audiences with the right messages.