This is the sort of trick question that typically raises the dogma of “3 to 6 percent of revenue”. But all that does is make you approach your marketing backward, by starting your strategy with the budget.
A strategy is a response to a challenge, so why start with the budget?
Instead, plot a business goal (where do we want to be?) and see what marketing can do (how do we get there?), and then see which budget is required (can we get there?). Then you can see if it’s feasible, or if you need to adjust your goals or budget.
Look at the following starting points:
- “We have $50,000 to do a campaign this year. What are we going to do?”
- “Before the end of the year, we can get 5,000 customers from segment X, and it’ll bring $500,000 in revenue. It’s going to cost us $75,000 in media spending.”
Which one would you choose? The first one is the safest, because dogma agrees with it. The other example is directive: it mentions an opportunity and what it brings and costs. Is 15% of revenue OK to gain that market share? That depends on a lot of factors. But while one approach is dumb, the other provides direction on which you can navigate. If you approach marketing like that, you wouldn’t even ask “How much to spend on marketing?”
And the thing about this question is; it comes in many forms — just like “Which media should we use?”, it’s all poor starting points for a strategy.
