"

Marketing budgets for 56% of companies will rise in 2016, according to Selligent / StrongView

"

“B2C companies with revenues over $25mm spend around 9% of revenues on marketing”

CMO Survey 2015

Decoding Modern Marketing

2. Budgeting

Brand Advertising and Brand Activation cost money and include many potential channels and choices. But before you can start to decide what to spend, where, you need need to know how big your budget is. Your marketing plan process should have identified your business goals and the tactics that were most likely to accomplish them. As part of that process you should also have estimated the associated costs and projected performance of those tactics in order to prioritize them. This now becomes the basis for your campaign budgeting.

You need to know how big your budget is.

If you haven’t gone through this process, then you should quantify your goals for the year or the time period you’re looking at, and determine how much you can spend to achieve them. If your goal is to increase sales by 20%, you need to understand what the marginal value of those sales are and how much can be invested to get them in order to deliver the required ROI. This calculation may also be influenced by other considerations, such as goals of increasing share of market, or investing in the long term value of an acquired customer.

Another way to approach budgeting is to start with the end in mind. Decide how many sales you want to make and work backward through the funnel to determine how many people have to go in the top and what you can afford to pay to get them. To do this successfully your assumptions about conversion at each stage of the funnel have to be solid and conservative. You also have to factor in that since your Paid advertising will be working with other Owned and Earned tactics, the budget will have to incorporate a portion of their costs and performance estimates.

According to the 2015 CMO survey, B2C companies with revenues over $25mm spend around 9% of revenues on marketing, while B2B companies spend around 8%. This not only covers advertising spend, but staffing, CRM, content costs etc. Interestingly if you study the fastest growing midsize and large companies, many spend much more than this. In 2014, for example Salesforce spent 53% of its total revenue, Linkedin 35%, Microsoft 18% and even Tempur & Sealy, the bedding company, spent 21%. Those are very big numbers, but it’s fair to note that these companies also routinely produce outsized year-on-year growth.

Typically companies that invest heavily in marketing do better than those that don’t.

Of course there are no hard and fast rules. But typically companies that invest heavily in marketing do better than those that don’t, everything else being even. That’s why some of the world’s most valuable companies are the best marketers. That said, I always understand the hesitancy that business leaders have, especially in midsize companies, when they leave the comparative comfort of their own business’ and venture into the less predictable world of marketing. Unfortunately, however, the time when companies could avoid this discomfort and bypass marketing has passed. The expectations of the digitally savvy consumer combined with a highly competitive environment mean that being good at marketing is essential for most companies now.