What the Heck are Your Competitors Spending on Marketing?
SHORT ANSWER: 9% OF ANNUAL REVENUE*
Lessing-Flynn looked at two annual marketing spend research surveys conducted in 2022: one from Gartner, the other from Deloitte. Both had been surveying CMOs nationally for several years and their results were very similar. Gartner found that the five-year average marketing budget spend as a percentage of company total revenue was 9.72%, while Deloitte found that number to be 8.69%.
*Not convinced this is right for your industry? Read on.
Want to see for yourself? Here are the links:
What’s Included in the budgets?
When asked, here’s how CMOs broke out their spending categories. Interestingly, sales support tools and sales employees were not included in marketing budgets for the majority of respondents.
Percent of marketing budgets that include the following categories
But what about your industry?
Marketing budgets vary across different industries. You’d expect an auto manufacturer’s budget to be different from a university’s, right? Generally, companies selling products spend more than those selling services, and B2C companies tend to spend more than their B2B counterparts.
Marketing spend as a percentage of overall revenue
Marketing spend as a percentage of overall revenue by industry
WINNING MARKET SHARE
Keep in mind that these percentages are averages. If you’re the best marketer in your industry, you may be able to grow your business and win more market share by spending the average. But realistically, you may have to spend more on marketing to win market share, especially if you’re considering a big initiative like launching a new product or service or rebranding.
Does size matter?
It depends, of course. Interestingly, if you’re basing “size” on sales revenue, there’s not a general correlation. However, if “size” is measured by the number of employees, generally smaller companies spend a significantly higher percentage of revenue on marketing compared to those with more employees.
Marketing Budget Percentage of Revenue by sales
Marketing Budget Percentage of Revenue by Number of Employees
“I believe that advertising is an investment instead of an expense. It is the seed which brings good or poor returns according to the skill with which it is sown.”
– PAUL LESSING, LESSING-FLYNN FOUNDER, 1912
LET’S TALK ABOUT BENCHMARKS.
The averages above are benchmarks. They help provide guidance on how other companies of similar size and/or in similar industries invest in their businesses through marketing.
In general, companies that spend the average in their marketing efforts can expect average growth. Our experience has been that the companies that have a growth mentality for their business tend to think about marketing as an investment in that growth, not an expense. Company leadership should expect to see returns on their investment in marketing.
CONSIDERATIONS THAT MAY AFFECT HOW YOU SHOULD COMPARE TO BENCHMARKS:
- Market size
- Market geography
- Product/brand positioning
- Longevity/established products
- Maturity of sales channels
- Company size relative to competitors
- Sales and market share goals compared to existing position
- Competitive pressure
QUESTIONS TO ASK YOURSELF WHEN CONSIDERING HOW TO INVEST IN MARKETING:
- How large is your company compared to your competitors’?
- What opportunities are there to win market share?
- Where are your best opportunities in the market and what’s your current position?
- What are your business growth goals?
- How technologically-savvy is your marketing compared to your competitors?
- How important is product brand in the purchase process for your end users?
- What’s the level of innovation in the industry?
- What’s the maturity of the product category?
- What might a competitor do that would change your industry?
The best brands in the world treat their marketing budgets like an investment. Part of that investment should be with an ad agency that can provide unique insights and a perspective you can’t easily get from the inside. It doesn’t take a big agency to do that. In fact, we believe most clients benefit from the nimbleness of a smaller agency — one kinda like Lessing-Flynn, the longest-standing independently owned advertising agency in America.
So, if you’re looking for a fresh perspective, new insights and needle-moving strategies … we’d love to chat.