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Marketing – How Much Should a Company Spend?

Now this is a million-dollar question (quite literally in the case of some companies). We often get asked this by new clients who have not had consistent marketing campaigns running before, as it can seem a daunting investment, especially in the business start-up phase.

Age is just a number

One figure that gets bandied about frequently is 10%. According to Gartner Research, in 2014 companies spent an average of 10.2% on overall marketing. But that figure might differ depending on how mature the company is. A well-established brand might not need to spend a great percentage. However, a company in the growth and development stage should pour more money into the marketing coffers.

What you do

It also depends on what your business is. In 2014, Twitter invested 44% in sales and marketing (and saw an 111% growth). All the while LinkedIn put in 35% and grew 45%. In the same year, Apple invested a mere 7% of their revenue – their growth was also 7%.

A 2014 American study showed that companies with less than $25 million in revenue were spending an average of 11%, with companies in the $25-99 million in revenue spending 9%.

Overall, the conclusion is that companies are spending more money on marketing because it produces results. Less than 10% won’t cut it for most businesses if they want growth. For maintaining a market share and position, the recommendation is roughly 5%. The Apple figure above demonstrates how this plays out.

Competitive marketplaces

If you are in a competitive market (e.g. retail, pharmaceuticals or consumer products) then you will probably need to spend more. Such firms tend to spend between 20%-50% of their revenue on getting the word out there.

If you want to make money you need to spend money. Smaller companies and businesses should look at what their competitors are doing as a benchmark. Of course, rival companies won’t share that info, but it is possible to estimate what they are spending judging by their output.

Review review review

Investment in marketing also needs to include metrics so you can work out what’s working (and what’s not). Then you can choose to either continue to use those strategies or amend them. Unless you do this, you will not be able to achieve the ROI that is available to you and you will essentially be wasting your money (and no-one wants that).

Making that marketing investment

It can seem quite a daunting prospect to invest hard earned capital in marketing exercises that may or may not provide a good ROI. Of course, your chances of success are greatly improved by employing the services of a good marketing agency or marketing consultant, or employing someone with marketing experience.

If you would like a helping hand to grow your business, contact us today to discuss what we can do for you.