Leverage research data to set a budget that keeps you competitive
When determining a marketing budget for the coming year, there is no reason to go at it alone. There’s plenty of great research at your disposal to identify what an appropriate number would be, based on a variety of survey data from other marketers.
Especially at this moment, with a health crisis upending carefully laid plans on a global scale, the need for marketing leaders to drive growth requires strategic investment and foresight.
Despite Turbulent Times, Digital Continues to Dominate
At a general level, the Gartner Research Group provides some simple stats from their CMO Spend Survey 2019-2020.
- Average marketing budgets were pegged to around 11% of revenue
- 78% all marketers surveyed planned an increase in their digital spend for the coming year
Although Gartner focuses mostly on organizations grossing more than $500 million per year with a large information technology infrastructure, some of their key findings appear be accurate for organizations of all sizes:
- Digital and mobile marketing are projected to be the largest increase for the coming year.
- The biggest growth areas were in strategy development and digital transformation program execution.
- Spending on martech cooled slightly, but merely as a result of the typical technology buying cycle.
Adapting to Survive and Even Thrive
Forrester Research is another data source that provides useful insight on marketing budgets. They focus more on technology companies and the role of digital technology in marketing. They reference a preferred source for detailed stats, the CMO Survey from CMOsurvey.org, which provides data broken out by economic sector, revenue size, and industry sector.
If you want to include all of the CMO Survey factors when determining your marketing budget, add the economic sector average spend, revenue sector average spend, and the industry sector average spend and divide by three.
For example, if I was planning a budget for a B2C Services company, doing less than $25 million in revenue, in the Communications industry, I would add 5.3% + 7.3% + 7.5% and divide by 3 to get 6.7% as my percentage of revenue budget for marketing spend. So, if the example company had $20 million dollars in revenue, they would be dedicating $1,340,000 to their marketing budget.
How much of that percentage goes toward employee and non-employee expenses depends on the make up of each organization. It stands to reason that the bigger your internal marketing team, the less you would spend on outside agency partners and media spend varies greatly from one organization to the next, depending on your offering, industry, customer segment and market size.
Another useful source for aggregated data on marketing spend from all these surveys and marketing peers is the CMO Council website at www.cmocouncil.org.
If you have other sources you like to reference or another way you go about setting your budget, please feel free to share. Obviously, every organization has thoughts on how to set an appropriate marketing budget but I firmly believe that to succeed, even in volatile times, you have to be current and competitive. This data provides valuable guidance on how to stay up to speed and outperform the rest of the pack.