What the experts say
Marketing bodies suggest between five and ten percent of annual revenue, if you are a company turning over less than £5 million annually.
The reality
It depends on a number of different factors, such as the type of industry you work in and the objectives and culture of the business. Some companies rely heavily on word of mouth and so don’t have a set marketing budget. Others have high growth targets and lots of competitors, so tend to have a much more detailed marketing strategy, which includes reforecasts and reporting on return.
It really depends on individual company objectives and often comes down to what the business can afford. Within a sales-orientated culture with a marketing team that is aligned and integrated, you are more likely to see marketing budgets and ROI targets. In project-orientated environments, marketing budget is often allocated on a project-by-project basis, for example a product launch or a re-branding exercise.
The importance of planning
However much you spend, it is helpful to outline objectives and set targets before you start to invest time and money. Don’t get disheartened if results do not materialise overnight, you may need multiple touches and time to hone your key messages.
It is essential to test market methods to see which combination provides the best return, before investing heavily. So many factors can alter business objectives, so it is important to be able to build in additional activity or scale back to meet budget restrictions as required. Negotiating shorter contract periods can help to facilitate this.
Budget by activity
According to recent research by Forrester, the average firm allocated 30% of their annual marketing budget to online activity and this is set to increase. This makes sense as a company’s online presence is essentially their shop window and online marketing is relatively inexpensive, yet is easy to track, monitor and edit.
A recent report by Program suggests a larger percentage is spent on email marketing with more traditional marketing activity such as tradeshows, events, direct mail, PR, print, outdoor and radio advertising, listed at less than 30%. These activities can often cost more but can be less frequent. It is important to try and calculate the potential lifetime value of any new business that could be won against the total marketing investment.
The importance of measurement
However much you spend and whatever the marketing activity, when it comes to business growth, marketing is all about supporting the revenue line. Having a detailed plan helps to understand the metrics required to achieve growth, measuring success against these metrics, provides the intelligence to make the appropriate changes and stay on-track.
For example, how many leads do you need to generate? What is the required conversion rate? What is the average revenue per customer? What is the expected return from your marketing investment? You need to work these figures backwards and run test marketing to get a feel for the answers, to ensure you are generating enough converted leads for sales to meet their revenue targets.
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