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What Should Marketing Cost?

The rule of thumb used to be that companies should spend 10 or 15 percent of revenue on marketing but today that can vary widely. For most of our clients, that percentage is much lower, especially when marketing programs are steadily implemented over time.

New entrants may need to spend more than those that have been around for a while. Intensely competitive industries may require more spending. Consumer-facing companies may need more marketing than B2B firms, which often put more into sales.

And, of course, what’s the definition of a marketing expense? A lawyer takes his client golfing. Does that count toward the marketing budget? What about sponsoring the hometown parade? Or the trade association that spends considerable resources on marketplace education. Is that considered marketing or something else?

Keep the big picture in mind. Yes, it’s good to know what’s being spent and it’s also helpful to categorize the spending in a sensible way. Just don’t get hung up on classifying in too fine a way.

It’s more important to identify the main expenditures—and not just money spent out-of-pocket. Account for time spent by employees, too. For instance, a company employs a receptionist who helps get marketing mailings out the door. That company might have a percentage of their person’s salary/benefits assigned to the marketing budget.

Once the inventory takes place, assess the spending against your marketing goals; is the money going to your priorities? How are things trending? And consider how the tactics work together. Some tactics might not fit very well with everything else.