Does Your Marketing Budget Set Your Company Up for Success?
Budgeting is a notoriously stressful process, but an appropriate budget can set your business up for success. By looking at the 2017 marketing budget from other companies, you can more accurately benchmark your own spending to create a successful 2018 budget.
Reviewing 2017 Marketing Budgets
According to the 2016-17 CMO Spend Survey by Gartner, marketing budgets have continued to increase for the 3rd year in a row. The survey shows that the average budget for marketing was around 10-13% of company revenue in a given year. The budgets include the entire marketing mix, both digital and offline.
There are a few key things to notice about 2016-17 marketing budgets that demonstrate trends you should understand.
So, here are the highlights of company budgets from 2016-17. Knowing the trends and evaluating the results can help you to understand whether your 2018 marketing budget will set up your business up for success.
10-13% of Company Revenue
Out of the more than 300 leading marketers in the US and UK, the average budget for marketing in 2016-17 was around 10-13% of company revenues. This is a steady increase from the average 2015-16 budgets of 10-11% of revenues. Most marketers still expect budget growth, with only 14% bracing for future cuts.
Higher Digital Spending & Lower Non-Digital Spending
Traditional marketing methods are still an important part of a marketing mix, but spending on all forms of digital marketing has increased while traditional marketing methods have stayed constant or decreased.
Company Size Affected Budget Increases
Larger companies, defined by the survey as those with more than $5 billion in annual revenues, showed a larger increase in marketing budgets, compared with smaller companies (those with $250 – $500 million in annual revenues). Larger companies tended to have marketing budgets around 13% of revenues, while smaller companies tended to have budgets of 10% of revenues.
Industry innovation and competition also had a similar effect on budgets. Companies in highly competitive industries tended to increase marketing spending, while those in less competitive industries tended to stay on the lower end of the average budget.
Digital Commerce Increased More Than Advertising
Company websites were the highest spending category of 2016-17 marketing budgets, with digital commerce as the second-highest category. These two top spending categories show an increasing focus on providing customers with greater value online.
Digital advertising is also increasing, although there are growing concerns about ad-blocking software especially in the form of digital video ads.
How to Formulate Your 2018 Marketing Budget
Your 2018 budget should be complete, but it’s still helpful to determine whether it is setting your company up for success. If not, you can always adjust your budget.
So, here are important questions to ask about your 2018 marketing budget.
Was 2017’s Budget Successful?
To establish an appropriate 2018 marketing budget, you should measure it against benchmarks to be sure you’re not underfunding or overfunding your marketing operation compared to competitors.
What Worked and What Did Not?
If specific marketing efforts did not yield the expected results, you may want to adjust your budget accordingly to get the best marketing ROI. Activities with expected, or better than expected outcomes, may do well with budget increases. Adjust your marketing mix based on the best marketing channels for your industry and company.
Where Is your Marketing Focus?
If your 2018 focus is different than 2017, you may need to budget the flow of money to reflect that change. For example, companies shifting focus from traditional advertising to digital advertising should adjust their budget to allow for more flexibility in the digital ad space.
Balancing Short-Term and Long-Term Goals
Digital marketing tends to drive some marketers into a strong short-term focus, because of the potential for quick returns. However, it’s recommended that you don’t neglect long-term marketing strategies that will help you stay competitive in the long-run. While short-term ROI can be higher for some actions, long-term ROI must also be considered for a healthy marketing strategy.
Trends from the 2016-17 CMO Spend Survey can help you prepare a successful 2018 marketing budget. Observing trends and shifting strategies can be an excellent way to benchmark your own goals and milestones to set yourself up for greater success in 2018.
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