Many businesses ask this question, and the truth is there’s no definitive answer. The amount you spend on marketing will depend on the size of your organisation, your strategy, and the stage of the business cycle you’re in. According to a Gartner study, companies spent 10.4% of their revenue on marketing in 2014 on average. Big companies like Procter & Gamble, General Motors, and Red Bull tend to spend more than the average amount of money on marketing – and it pays off.
Why marketing is important
Marketing is crucial for your company’s success – you have to spend money to make money. If you’re not marketing your business, you’re not making progress – it’s as simple as that. Without it, your company won’t get the exposure it needs to build customer relationships, make sales, and make a profit. According to this report by Ad Age, the top 200 advertisers in the United States collectively spent a record $137.8 billion on advertising in 2014, up 2% from the previous year.
You might still be wondering, how does a company determine how much of their budget to spend on marketing? If you want to maintain your current position, you should spend around 5% of your total revenue. If you want to grow (as most businesses do), the general rule of thumb is to spend around 10%. According to a 2014 CMO survey, companies with less than $25 million in revenue spent an average of 11% on marketing, and companies with $25–$99 million in revenue spent an average of 9% on marketing. However, this isn’t a one-size-fits-all figure. Here’s what larger companies are spending on marketing:
Both Twitter and LinkedIn can be used as marketing tools, which means they understand the effects and importance of marketing. They’ve invested 44% of their revenue in sales and marketing, and saw a growth of 111%. That’s a pretty impressive figure.
- LinkedIn invested 35% of their revenue and saw a growth of 45%
Traditional tech companies like Microsoft, Apple, and Intel had to evolve and incorporate SaaS into their strategy to keep up with the changing times. Since we’re living in the age of technology, these companies thrive and can afford to invest more in their sales and marketing. And since they’re so established, they’re not looking for the same exposure as smaller companies – but this doesn’t mean they should stop investing in marketing completely.
- Microsoft invested 18% of their $51.8 billion revenue in sales and marketing in 2014, which lead to 12% revenue growth
- Intel invested 15% of their $8 billion revenue, and lead to a growth of 6%
- Apple invested 7% of their $11.9 billion revenue, which lead to a growth of 7%
- Google invested 12% of their $8.1 billion revenue, which lead to a growth of 19%
SaaS sales and marketing
Software as a Service (SaaS) companies like Salesforce, Marketo, and Constant Contact are in the business of marketing and sales management software, so they know the power of marketing and sales.
Salesforce invests 53% of their $4.1 billion revenue into sales and marketing. While this is a much larger figure compared to other companies, they’re not spending their money in vain – they grew by 33% over the previous year.
Email marketing company, Constant Contact, invested 38% of their $331 million revenue into sales and marketing, which resulted in growth of 16%. Marketo, a marketing automation software company, spent about 67% of their $98 million revenue, and achieved a whopping 56% revenue growth year-over-year.
Manhattan Associates spends 11% on marketing and sales efforts. Bottomline Technologies spends 24% of their budget. Tableau spends 53% of their revenue on sales and marketing, and saw an impressive growth of 78%.
Many companies are reallocating marketing budgets towards inbound marketing, and according to the Content Marketing Institute, effective B2B marketers spend 39% of their marketing budgets on content. Companies may wonder how much they can expect to receive in return for their marketing investment; as you’ve seen above, it differs for everyone. That said, if you want to see proper growth in your company, you shouldn’t be spending less than 10% of your revenue.