For many years I’ve used 2% of company turnover as a guide for marketing spend. But it now seems that figure may be out of date – it’s time to rethink my budget benchmarking.
Gartner recently released their CMO Spend Survey 2019-2020, and it showed the average marketing spend in North America and the UK was 10.5% of revenue. I find marketing budget benchmarking really useful – especially when I’m pleading with the CEO for more money.
Spend reached its peak in 2016 (12.1%) from an earlier figure in 2014 of 10.2%, but 10.5% seems to be the new average. However, the research shows there is a great deal of variation from one sector to another. Competition, profit margins and the ability of the industry to attract marketing talent will all impact an industries view of marketing value… and therefore, budget.
The figure of 10.5% includes staff pay, paid media, agency charges and investment in marketing technology (MarTech). Please note my figure of 2% didn’t include staff salaries.
Interestingly, MarTech has seen the greatest rise and now accounts for some of the largest spend (26%, up from 22% in 2017). New technology could, as has happened in other departments, result in the need for less staff to achieve the same results or the creation of new roles to achieve better results.
Another observation is that CMOs are placing more emphasis on measuring brand awareness. I believe this is unwise for smaller companies (see my article ‘Brand awareness’ is a load of …’). They may not have the tools, or ability, to accurately gauge awareness. However, every marketing manager should be able to calculate ROI.
ROI is also easily understood and appreciated by CEOs and CFOs – the final judges of your marketing budget. Prove an ROI of 3:1 or 10:1 for every £1 spent on marketing and they will surely increase your budget – as long as it’s in line with the benchmarking.
Obviously, budgets sometimes get cut. If that looks likely, or if you have already been told to tighten your belt, I have 6 tips for squeezing every drop of marketing juice.
6 tips for a tight marketing budget
These are the actions I have taken in the past when faced with a slim budget, but they are worth doing even when you get the full amount of money you have requested.
1) Find the winners and losers
Good marketers are scientists, so spend time analysing the past performance of your channels, programmes, campaigns and strategies. What worked and what didn’t work. We all have our favourites, but this is a time to be objective.
2) ROI should be your benchmark
Multi-channel marketing has so many different elements; it can be challenging to be sure what contributed to the success (or failure). You have to find a way to calculate ROI, both immediate and over the lifetime of a customer.
3) Be brave and cut the under-performers
Now you have calculated ROI, you need to take a deep breath and cut the losers – even the ‘sexy’ new stuff. You have a tight budget and need to outperform your rivals.
4) Use the 5% rule
Financial advisers use a rule that you should never invest more than 5% of your money in any one fund. Good advice. Do the same with your marketing budget – spread the risk.
5) And the 10% guide
Allow yourself some money to discover new winners. I recommend that 10% of your budget should be allocated to experimentation. So, a £100,000 budget would have £10,000 assigned to experiments, and of the remaining £90,000 no more than £4,500 would be spent on a single item.
6) Imagine the money comes from your personal bank account
This is an idea I have applied since my first day in marketing. Sometimes we can be a bit cavalier when spending corporate money; it’s different when we spend our own. I’m not suggesting you should always play it safe, just pause occasionally and question your motive.
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