How much sould a CEO spend on a marketing budget?

Whether or not it is the first question asked, it is usually one of the first questions a CEO thinks about when discussing his or her marketing efforts: how much should I spend on a marketing budget?

Well, the average company spent 10.4% of its revenue on marketing in 2012. And according to Gartner, that marketing budget is scheduled to go up by 6% in 2013. Now this includes salaries of the marketing people, but it doesn’t include things like software licenses or servers for the data. And this spend widely varies for the types of companies from IT at 3.5% to over 12% for media companies.

Look at your budget. Is your marketing spend in line?

More importantly, what are you spending your budget on? Because marketing is changing and so should your marketing spend. In the past, companies allocated a lot of resources to billboards, sponsorships, trade shows, print brochures etc. In the age of inbound marketing and sales, is this still where you should be spending?

It depends. It may be time for you to put everything on the table, review where you are spending money, and then benchmark against your competitors. Let’s look at a couple of other key findings from the Gartner study.

• Digital Marketing Spend Averages 2.5% of Company Revenue: some companies are spending 50% of their marketing budget on digital, while others are spending far less. If your revenue is 20,000,000 dollars, then your total marketing budget might be 2,080,000 and your digital marketing budget could be anywhere from 100,000 to 1 million. The average is $500,000.

What are digital marketing expenses exactly?

For those of us who have heard the term but are not completely familiar with what it means, Gartner defines these expenses as including personnel costs, contract labor, software as a service, and external marketing services such as agency creative services, search, website design, content creation and management, social, like Facebook and Twitter, and mobile marketing. For more information on this, read Alan Vitberg's excellent post.

• 41% of marketers say that savings from digital marketing are reinvested. Marketers are finding that the cost of digital is less than other means to acquire leads and are reinvesting the savings back into their digital efforts.

A Google ads campaign, for example, can, but doesn’t always, cost less than a print campaign. A product description available on the website almost always costs less than a printed brochure.

• Up to 50% of Digital Marketing Activities Are Outsourced: This is a big one. Marketing is changing so fast and new and constantly updated knowledge is needed. Most companies are not big enough or cannot afford to have expert personnel in every area that is needed. 

It used to be that websites didn’t change that much, so your website designer could have lots of other tasks. Your advertising person knew what words sold and could handle different advertisements as well as other functions. And, we didn’t use to have analytics and data available in real-time and needing to be interpreted, acted upon and fine-tuned.

This is no longer the case and to be as effective as possible, you need to look for experts to help. At Chief Outsiders, we work with various companies for our own marketing efforts. Recently, I listened to our Wordstream expert, Patty Caltabiano, explain how she strategizes with Google Adwords and our Facebook expert from Pertnear explain how he develops Facebook campaigns. They are both spending all day, every day, keeping up with the changes and providing us with very cost-effective services -because they are specialists.

The same is true for your marketing leader. Every day, it is essential to keep up with your industry and your competitors. Many companies who can’t afford or don't need a full-time marketing executive are also turning to outsourcing as an option. I urge you all to read the full Gartner report and tell me below, what you think? Are you spending your marketing budget wisely? CEOs, do you spend the right percentage of revenue on your marketing budget?