A percentage of gross revenues is not what a marketing budget should be based on. The percentage approach – whether 1%, 2%, 4% or even more – was popular with a number of consultants and some in-house marketers for years. Comparisons to the accounting or architectural industries should not be used as the guide, as in “accounting firms spend X% of revenues on marketing, etc.” This approach is wrong on a couple of fronts.
It isn’t very original, and is the lazy person’s approach to budgeting for marketing. It doesn’t require any planning, which in turn means it is likely to be wasted and/or misdirected. I have been a proponent of zero-based budgeting, that requires thoughtful planning to arrive at what the firm, practice group or individual wants to undertake in order to reach the desired goals. Unfortunately, too many firms do not use such an approach.
If planning is done properly, which means it is goal oriented with specific measurable objectives, and action plans are designed to reach those goals and objectives, the budget can be relatively easy to arrive at and more likely to be approved. Assuming of course it doesn’t result in ending up being a large percentage of available revenues based on the overall firm’s business plan and its needs.
Consultant Kerry Randall recently posted an article entitled “How Much Should I Invest in Marketing?” He also talks about basing the budget on the “desired end result” and talks in terms of a return on investment. His article is worth reading.