How much should you spend on marketing?

How much should you spend on marketing?

One of the questions we often get asked at Green Door Co is ‘how much should my business spend on marketing’? If you’re in the middle of putting together your budget for next financial year, no doubt this question will have crossed your mind.

A Gartner survey undertaken last year reported that marketing budgets (for the top end of town) on average represented 12 per cent of revenue. You may have also heard it suggested that you should spend 5-10 per cent of your revenue on marketing.

While these numbers aren’t a bad place to start, they don’t represent the whole picture.

No two businesses are the same. Each business faces unique financial conditions – from turnover, to cash flow, to profitability – which can impede or enable an investment in marketing. Each business will have a unique marketing opportunity. Most importantly, each business will have unique business objectives, which marketing will be crucial in delivering.

To assess how much to spend on marketing you should start by asking yourself the following questions.

What is the business trying to achieve?

What are your business objectives? Make sure they are SMART – simple, measurable, achievable, relevant and time bound.

How will marketing help us achieve our goals?

Let’s say one of your goals is to launch a new product, start by considering everything you’ll need to have in place to effectively launch – an established brand presence, buzz around the product etc. If you work backwards you can identify what needs to take place in order for those thing to happen and what they will cost. This is a better way to budget than sticking to an arbitrary percentage.

In other cases, thinking about things in relative terms may be a helpful guide. If you’re an established business with ambitious growth goals in the next three to five years, it makes sense that your investment in marketing should at least parallel the anticipated growth goals.

Why do so many businesses not invest enough in marketing?

Marketing is one of those costs that businesses often mistakenly see as discretionary. Especially when things are going really well (because they think they don’t need it) or when things are going badly (they assume they can’t afford it).

The reality is that without investing in marketing, a business won’t survive.

The key is to get the balance right. If you’re a startup, your challenge is to reach your customer without having built up your brand recognition yet. Combine that with likely limited profitability and you’re facing a difficult challenge.

The key is to focus on the tactics which will give you the highest return on investment (ROI). For example you may find a targeted paid Facebook campaign is going to drive targeted leads at low cost. Or you may find that public relations will create a buzz much more cost effectively than relying on advertising.

Ultimately what you choose to spend on marketing is your choice alone. However, if you’re not getting the results you want for your business, I’d urge you to take a look at your marketing spend.

Interested in finding out more about what your business should be investing in marketing? Contact us.


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