I was browsing on LinkedIn Answers this morning and say a question: ‘What percentage of revenue do you spend on marketing?’
It’s a good question and one many that many business owners and entrepreneurs will ask themselves when thinking about setting budgets and managing growth. I have seen anecdotal figures that suggest that you should spend around 10% of your revenue on marketing. However, this is only a guide number and will depend on a number of factors such as the stage of development of your business – is it established, in start up mode, going for growth, do you have an established client base, entering a new market etc.
Another important consideration to think about is how much you spend on existing customers and how much is to acquire new customers?
In the end, however, it all depends on what return you are getting on your marketing budget. Know your figures and if you are not getting, a good return (at least 20%, say) then I would suggest that there are other and better ways that you can invest your marketing budget.
Personally, I believe that investing more of your marketing budget in your existing clients and relationships will pay greater returns than that investing your marketing budget in developing new relationships.
Ultimately, it’s not a matter of how much you spend on marketing, it’s more about how you market, to who, what you do with it and what you get back from it that matters.
Do you use a guide figure to determine how much you are spending on your marketing? What return are you getting on your marketing investment?