Budgeting for Marketing Success

September 10, 2013

We all know it takes money to make money; but not all investments are created equal.

As a manufacturer, odds are you have grown comfortable with investing in new systems, people, and equipment to improve the performance of your organization. When it comes to differentiating your brand, however, the same odds would suggest that you find it difficult to value marketing as an investment.

The ultimate dividend from any sales and marketing expenditure is revenue. That means every dollar spent telling prospects you are uniquely positioned to solve their problems could produce a cash return of two or three times the initial cash outlay. Every year, though, thousands of businesses spend too little—or nothing at all—on marketing.  They are inclined to defer or pocket their expenditures rather than advertise or spend staff time on sales and marketing activities.

As the legendary Dodgers manager Tommy Lasorda once said, “There are three types of baseball players: those who make it happen, those who watch it happen, and those who wonder what happens.” Chances are that if you have read this far, you are interested in making it happen for your business.  Perhaps you are just not sure how to get started.

Setting a budget is probably the best place to start. There is no universally accepted code when it comes to allocating funds for a sales or marketing budget, but there has been sufficient original research to establish a reasonable standard.

For businesses under $5 million in annual sales, the Small Business Administration (SBA) recommends investing 7-8% of net revenue in sales and marketing efforts.

The Chief Marketing Officer (CMO) Council is a bit more aggressive; it believes companies focused on business-to-sales activities should spend approximately 11% of net revenues to attract new customers.

Please note that these budgets include all manner of outreach and expenditures, ranging from adding staff, to new buildings and signage, and even search engine optimization (SEO).

What’s more, researchers with global technology research giant Gartner, Inc. have determined that budgets are growing when it comes to defining markets and attracting/acquiring/retaining customers. Of the six sectors they examined, manufacturing was the third most progressive.

Manufacturers’ average marketing spending for 2013 was forecast to be 10.6% of gross revenues—up 4% over 2012. 

As you let these facts and figures settle, spend a minute comparing how much your business invests in top line growth versus capital equipment. Capacity-building spending certainly has its place, but don’t forget: it’s difficult for any business to run at full capacity when would-be customers don’t know they exist.

14% of companies invest less than 5% of revenue on market outreach efforts.

With summer turning to fall in the next several weeks, now is an ideal time to study where and how you can invest to grow your top line revenue. For more information on how you can establish a right-sized marketing budget for your business, call 215-464-8550 or click today.