If you’re a marketer you’re used to thinking creatively. How can you reach your target group? What is the brand image you’re trying to project? But these things, while important, are the only party of marketing a product or service, something else that is extremely important is your marketing budget and the average marketing budget depends on your industry.
How much you should expect to spend on marketing entirely depends on your unique situation. For the longest time, the conventional wisdom was that, as long as you’re not a multinational conglomerate, your marketing budget should make up around 7%-8% of your revenue, but with the advances in technology and surveying new knowledge on the matter is gained almost daily.
There are multiple factors that influence the marketing budget of any given company. We analysed the latest “CMO Survey” by Deloitte and the American Marketing Association, which analyses and dissects the opinion of top marketers all around the world in a bi-yearly report. The main takeaway is that your average marketing budget depends highly on your industry and strategy.
B2B or B2C?
The first glaringly obvious difference in marketing budgets are in the B2B and B2C market segments. In general, B2C products by far have the highest marketing budget of around 12% of revenue, whereas it’s only 5% for B2C services. For B2B, both product and service companies spend around 7-9% of their revenue on marketing, with the B2B product segment leading marginally.
But these numbers can be misleading. The survey also found that 79% of all marketing budgets include the cost of marketing employees, which means that a company could potentially outsource their entire marketing department and have the cost listed as marketing expense instead of regular payroll on their income statement. This makes analysing the data a lot more difficult as it can be greatly misleading. Obviously if you have an in-house marketing department you should never aim to spend as much on marketing as a competitor that has outsourced their entire marketing department.
An even better benchmark for your marketing budget can be inferred by looking at the average budget in your specific industry.
Average Marketing Budget by Industry
Naturally, different industries are going to have different marketing demands. There are multiple factors that play into this equation, but the most important one is definitely competition. The more fragmented an industry is, the more each player has to spend on marketing to solidify their position in the market.
Leading the list of industries in the CMO Survey is the education industry, where around 18% of revenue is spent on marketing. A close second is the energy sector with almost 17%, followed by communications with 14% and banking & insurance with 13%.
Some of our European readers might be wondering why education is the highest spending industry, but do consider that this data is coming from the US, where especially higher education is less available and more fragmented than in many European countries and where many world-class universities fight for the available students.
How to derive meaningful marketing goals
Knowing all of this allows you to set meaningful and actionable benchmarks. Before setting your marketing goals and budget you need to be aware of the industry you’re operating in, your target group and how it can be reached, and whether or not your product benefits from a strong brand image.
In general, a good idea is to focus on marketing channels that have a high return on investment (ROI). Among those are especially digital marketing channels like search engine optimisation, content marketing, and email marketing.
But don’t be fooled by the statistics and don’t just emulate everything that’s popular. Digital marketing channels rank especially high for ROI because they are very measurable. You will know exactly how many sales your email marketing campaign has generated, whereas more traditional marketing methods do not allow for this level of analysis. This makes them very effective for marketing measures at the bottom of the funnel, but relatively ineffective for the top of the funnel activities.
Consider a billboard. You would never know exactly how many people saw it or how it influenced their behaviour. There are studies that estimate these things, but they’re all just that: estimates. Depending on your available budget, it can be extremely profitable to think outside of the box.
Unfortunately, there is no one-fits-all formula for setting marketing goals and budgets. Everything depends on your own, unique position. However, industry trends do show certain patterns that can help with establishing benchmarks.