Marketing Budget

Benchmarking Marketing Budgets

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Two of the most common questions I hear from fellow marketers is: “How much should I spend on marketing?” and “How much of my marketing budget should I spend online?” One way to look at this is through benchmarks.

Blackfriars Communications recently published the latest version of their “Sizing US Marketing 2006” report, updated to include statistics from Q3, 2006. Among the findings of this report:

  • B2B companies plan to spend 4.3% of their 2006 revenue on marketing (compared to 6.8% for their B2C counterparts). Although not explicitly stated, I presume this number includes both staffing and program spending.
  • B2B companies spend 28% of their marketing budget on advertising (compared to 40% for B2C companies). Not surprisingly, most of the gap is made up for by B2B’s increased spending on events (17% of the budget). Other significant categories include direct marketing at 12% and PR/AR at 8% of the budget.
  • B2B companies spend more of their marketing budget online than B2C companies (17% for B2B versus 15% for B2C). This primarily reflects a higher portion of advertising going online, but also includes email and website expenses. (I should point out that this average number masks a wide range, with some companies spending 100% of their marketing programs online, and some companies spending nothing.)

MarketingSherpa’s Business Technology Benchmark for 2006 provides additional information for marketing spending at B2B technology companies in particular. A few highlights:

  • B2B technology companies spend anymore from 0.9% to 8.7% of revenue on marketing, with the average company spending 3.6%. (This number includes headcount and programs, but does not include any sales-related expenses.)
  • Service companies and ASPs tend to be at the higher end of the range, while complex manufacturers and companies with fewer than 1,000 prospects tend to be at the lower end of the range.
  • Young companies (under 10 years old) tend to spend more than average. Brand-new start-ups should use total cash in the bank as the baseline to set marketing budgets, rather than revenue.
  • B2B technology companies on average spend a whopping 31% of their marketing budget online, with smaller tech companies spending an even higher percentage online (37% of the total). This reflects the fact that online channels can be easier to get into and test at lower overall costs than more traditional offline channels.

IDC found similar numbers for IT vendor spend on marketing (as reported by Tom Pisello on SandHill.com). Their findings included:

  • IT vendors spend an average of 3.6% percent of revenue on marketing. Software vendors spend the most (6.5%), hardware makers spending 3.7%, and IT service firms spend only 1.1%.
  • IT vendors spend 63.5% of their marketing budget on programs and 37.5% on headcount.
  • IT vendors spend the biggest portion of their budget on advertising (23.2%). Other significant budget items are events (19.3% of the marketing budget); sales tools such as case studies, whitepaper, and interactive on-line tools (16.8%); direct marketing (12.9%); PR (6.5%) and AR (2.3%); and collateral (5.1%).

How much do you spend?

I hope you find these numbers useful. Please share (anonymously if you like) what you spend on marketing as a percent of revenue, and how you allocate that budget. I’ll compile the answers and share the results with everyone.