How much should I spend on Marketing?
In the mid 90s, Steve Jobs took a company on the brink of extinction and turned it into the largest and most successful brand in the world. The Apple of the 90s looks a whole lot shinier today, sitting pretty at the top of Forbes most valuable brands list for the seventh year in a row. So, how did Jobs do it? Besides being a visionary and perfectionist, Steve Jobs was a genius marketer. He understood the vital role marketing plays in a company’s success, which explains why Apple and many of the most successful companies in the world spend more on marketing and sales than they do on research and development. A strong brand and marketing strategy is a powerful asset and Jobs knew it.
Determining the effect of marketing on a company’s growth is not black and white. There are many factors that combine to create a successful and growing business. However, without marketing a company gets very little, if any, promotion or exposure, meaning the chances of growth are slim to none. This is a well-known fact among marketers, evident in the amount of dollars successful corporations allocate toward sales and marketing every year.
So, how does a company determine how much of their budget to spend on marketing? We decided to look at a handful of some of the most successful large and mid-sized companies across a range of industries to find out how much they allocate for marketing and what they get in return.
Is 10% the Magic Number?
Ten percent — this is the magic number you will likely hear whenever you ask how much of your
revenue you should spend on marketing. But is that true for everyone? What about a company in its growth phase vs. a well-established brand like Apple?
According to a 2016-2017 Gartner Research study, companies are now spending roughly 12% of annual revenue on overall marketing. The study concluded that “larger companies (>$5 billion revenue) spend 13% of revenue on marketing, while smaller companies ($250 million to $500 million revenue) spend roughly 10% of annual revenue.”
A 2017 CMO survey published by the American Marketing Association and Duke University pegged the numbers a bit lower, reporting that across all industries businesses spend 11.4% of budget on marketing and only 6.9% of revenue on marketing. Of course, these figures vary wildly when you drill down into each industry.
Percent of revenue by industry:
Consumer services: 17.4%
Consumer Packaged Goods: 11%
Service Consulting: 9.4%