Do Building Product Companies Have to Spend Money on Marketing to Grow?

15 Aug

 

Reviewing Marketing budgets for 2013

It is that time of year when many of us in the building material industry are trying to figure out how much to spend on marketing next year.  With 2013 being a year where things should finally be on the rebound in most of our market segments – how should we plan for growth?  We all know that saving your way to increased market share and growth is nearly impossible, even though a lot of that has gone on the last few years.  Beyond answering the question of more or less than last year, there are many other things to review and decide on.

It is always a good idea to complete a competitive review of marketing spend.  However, those numbers are difficult to find unless your competitors are all publicly traded and report all the specifics.  So, what do you do when your CFO wants you to justify spend on the overall % of your marketing budget?

A general “rule of thumb” that has been used for years across many industries netted these simple guidelines:

  • Total Revenue x 5% = Marketing budget required to maintain current awareness and visibility
  • Total Revenue x 10% = Marketing budget required to grow and gain market share

I was curious to see if there was deeper research that helped answer this question more completely; here’s what I found.

According to the 2011 CMO survey that was conducted in August of 2011, companies on average spend about 10% of their overall budgets on marketing.  Digging deeper into that number, they looked at how different kinds of companies spend and found the following:

  • B2B-services (11.1%)
  • B2C-product (11.6%)
  • B2C-services (12.1%)
  • B2B-products (7.0%)

The next thing to think about is size of company.  This survey found that companies with $500M or more in sales are spending less on marketing (5.3%) compared to companies with less than $500M in sales who are spending 11.7%.

When thinking about growth strategies for 2013, survey results found that companies using a market penetration strategy (focusing on current offerings and current customers) have the smallest marketing budgets compared to companies using market development (new offerings to current customers), or diversification (new offerings and new customers).  Marketing budgets follow growth.  In addition, marketing budgets are higher in companies that are planning to grow through partnerships but not through acquisitions or licensing agreements.

As you budget for 2013, keep these notes in mind; it’s data right from fellow CMO’s and it could be a great piece of your budget presentation for next year.

Click here to read more about CMO

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