The short answer is there’s no ‘one size fits all’ amount. In saying that, there is data from a 2017 American Marketing Association and Duke University study that showed an average of 6.9% of total revenue was invested in marketing across all industries.
In the NZ market, the percentage of investment in marketing ranges between 5-29% of total revenue – which is a huge variation. Generally, B2C’s invest more than B2B’s and in recent years the trend to invest in ‘digital’ channels – websites, social media, videos, blogs etc. has dramatically increased.
The easiest way to determine how much you ‘should or have to’ invest in marketing comes down to knowing what your business objectives are, who your customers/clients are and then identifying the right channels. By having a clear business plan and marketing strategy in place it will help any business make good decisions on marketing investment, irrespective of their product or service offering.
A marketing budget needs to include all the activities that potentially can bring a return on your investment. Those channels might include:
- Logo design, business cards, email signature banners, marketing collateral
- Photos and videos – stock or bespoke
- Expos, conferences, product demonstrations or tradeshow attendance
- Advertising – traditional or digital
- Sponsorships or affiliate marketing
- PR agency, Customer Relationship Management (CRM) tools or App contracts
All these activities when done correctly can lead to new business – however if done ad-hoc or without a clear goal in mind you might as well just send funds to one of those spam offshore email accounts extolling the virtues of being a long-lost relative; it will get the same result – loss of funds and no idea what it achieved.
Every business is different and will have different marketing needs to reach their goals. We recommend you spend some time looking at what you’re currently doing and how much you’re investing and being critical of the results.
If you have any data to look at (accounts, market research, google analytics etc) try and work out or consider your ‘Cost Per Acquisition’ – in other words, how much do you have to spend to convert one customer? And by spending X are you only maintaining your market position and annual turnover, or do you have a desire to grow – maybe you need to increase your marketing investment or reconfigure how you’re spending it?
By understanding this, you will be able to determine if your marketing spend is good, bad or ugly. Get in touch for a one-hour free consultation to find out how we can help, or contact your usual Baker Tilly Staples Rodway advisor. We’re here to help – our advice is impartial and tailored to you, your objectives and financial capability.