How much should companies budget for marketing?

Budget for anything is dependent upon its potential benifit.

So in a growing market a company may budget any amount and visa versa.

Usually budget is prepared based on past year actuals and adjusting it to current year's strategy.

Businesses commonly ask how much they should budget for marketing each year. Unfortunately, there’s no easy answer.

Yes, there are rules of thumb, but there are also numerous attenuating factors for each company to consider. The amount a business should budget varies based on its tenure in the marketplace (and if it has multiple products, it may have to allocate its marketing spend differently based on each product’s market status) and its industry, among other considerations. For example, industrial, business-to-business corporations may spend less than1 percent of their net revenue (total sales) on marketing established products, yet many consumer products companies spend50 percent or more of their net revenue on launching new offerings.

Marketing spend also depends on how much and how quickly you want to grow. The old adage is true: You have to spend money to make money.

Rules of Thumb

As a general rule of thumb, companies should spend around5 percent of their total revenue on marketing to maintain their current position. Companies looking to grow or gain greater market share should budget a higher percentage—usually around10 percent.

This percentage, of course, will vary by company and industry. For example, companies in highly competitive industries—such as retail, consumer products, and pharmaceuticals—often spend20 to50 percent of their net revenue on marketing.

Using the general rules of thumb, calculate your company’s ideal marketing budget below:

·         Total Revenue x5% = Marketing budget required to maintain current awareness and visibility

·         Total Revenue x10% = Marketing budget required to grow and gain market share

Caveat: These rules of thumb are based on businesses that average at least six-figure revenue numbers. Companies with smaller margins should allocate a percentage of their net revenue based on estimates of what competitors are spending. (And yes, they will have to guesstimate roughly at best. Competitors rarely share that information openly.)

These numbers will be out of the comfort zone for a number of businesses. Keep in mind that the total budget calculated by these rules of thumb covers all marketing expenses: The cost of marketing staff and their overhead as well as the cost of printing, advertising, and outsourced talent is included.

Many businesses have failed because they were unwilling to properly budget for marketing activity. Companies can grow to a certain point via word of mouth, but after they hit a certain size threshold, they will stall.

Other Considerations

Additional factors to consider when developing a marketing budget include new product/service launches, new market entries, and mergers and acquisitions. The percent-of-revenue calculation should be adjusted to account for these factors.

For example, businesses on average should spend10 percent of their gross sales for the year on marketing each new product or service, or20 percent of the new service’s sales and revenue target. And consumer products and services companies should always spend a higher percentage than business-to-business companies.

Expected Return

Companies may wonder how much they can expect to receive in return for their marketing investment, and how much an increased investment will garner them in increased return.

It’s a fair question. Yet again, there’s no easy answer. Some marketing tactics require a longer term than others for effective return. A marketing strategy focused on branding, for example, will need a longer period to see results than a lead-generation strategy. In general, most marketing activity snowballs over time, delivering exponentially increasing return the longer the tactics are underway in a coordinated, diversified fashion that covers the right audiences with the right messages.

Marketing should not push forward without success measures. Metrics should consider the marketing strategy—which hopefully aligns with the business strategy—and the different tactics involved in carrying it out. Measures can be global, across multiple tactics, and specific to each tactic. Yet a company should depend heavily on its marketing strategy and the tactics it employs to execute its strategy in defining all success metrics.

Every company sitipualtes20% of a total budget assigned for a product or a campaign.

So incase if100 thousand is total20 will be marketing budget normally.

well its depend on business..and prodect and place are also efect thr budget. example of that real estate.. thank  you for read my answer

Marketing is a very strong tool for increasing the business. 

Budget for the marketing can be depends on following factors.

1) Product and its actuals potential in market.

2) Type of the Target customers.

3) Value and possible profit.

4) Selection of the marketing mentod which can give better reach of the customers. Expenses / cost of the such marketing method ex. Via Exhibition, social media, Specific magazines, Banners etc...

For engineering / industrial products in Small / Mediem scale industries should be approx 7 to 10 % of the Profit.

Mostly in today business the Multinational companies are fixed budget for their Marketing Department,for the promotion of their product as well as for launching the new products for competing the others MNC . 

It depends upon the following factors:

PRODUCT

PRICE

PROMOTION

PLACE AND

PEOPLE.

So depending on all this factors a budget needs to be prepared for marketing. Market survey if done will be an added advantage.

Depends upon the financial health of the company and the service/ product offering....

When you set the marketing Budget there are some stratigies that you can follow depending on the sector and type of product that you are selling.

1) By objectives. You put a certain opjective that you want to reach and spend whatever the amount to achive that objective.

2) Percent of sales. which means you spend a standard rate of the sales. If you sold by1 Million you spend100K on marketing for example.

3) Like competitors. This strategy is used in some sectors where few competitors are in the market and the competition is very aggrisive, like Cocacola and Pepsi or Vodafone, Mobinil and Itisalat4)Certain Amount. Which means that you are concerned to limit the budget to cetrain amount of money whatever the output is.

Betwen20-35% of the organization profit.

AOA REHAN SB ITS DEPEND UPON YOUR COMPETATIVE PRODUCT IF HE DOMINATE THEN THE BUDGET INCREASES EVERY YEARS