Do you know how much money other organizations in your industry are spending on marketing? The CMO Survey — conducted by Deloitte, the Fuqua School of Business at Duke and the American Marketing Association — set out to answer just that.
While keeping up with the Joneses' marketing budget won't always make sense for your organization, understanding how much other companies are spending on their marketing allows you to get a better sense of what resources your biggest competitors may be investing in marketing. This isn't just nice to know: you may very well realize that you aren't allocating enough of your budget to compete with them.
Without further ado, let's look at what the CMO survey discovered — and what the implications are for your business.
Differences in B2B and B2C Marketing Spend Across Industries
The study looked at B2B and B2C organizations in a wide variety of industries. As you might expect, B2C businesses were found to allocate a larger percentage of their budget to marketing than B2B organizations.
No surprises here. B2B businesses have traditionally spent less on marketing than B2C organizations, though many would argue (myself included) that B2B are frequently under-investing when it comes to marketing.
The data gets more interesting from here, however. The study went a step further and broke down marketing spend by industry, in terms of the percentage of an organization's revenue.
The differences between industries are pretty wild. The energy industry is allocating almost nothing, relatively speaking, to marketing. Education and consumer services, on the other hand, are putting a significant chunk of their revenue back into marketing.
Some of these differences can be explained by purchasing behavior within their industry — the way a consumer learns about and makes purchasing decisions for a packaged good is not the same as how a CEO learns about and makes purchasing decisions about manufacturing products. However, the data here indicates that many organizations are beginning to understand the importance of digital marketing avenues in particular, as the study also found that digital marketing budgets continues to outpace traditional methods, which are receiving relatively steady losses.
So what are companies investing their marketing dollars in? While it differs for every organization, there are a few big trends in how companies are allocating their marketing budget. The study found that an increase in digital spend is happening at the same time that traditional (read: non-digital) marketing spend is starting to decline. Additionally, organizations are investing more in marketing analytics, CRM adoption, social media and video.
How Does Your Organization Compare?
To make use of this data, try this quick exercise:
- First, figure out what percentage of your organization's revenue is going to marketing.
- Next, write down the names of your top three competitors. See if you can find annual revenue figures for each of them. You may be able to come across this number fairly easily if any of them are publicly-traded, but if your competitors are privately owned, you'll have to rely on estimates. Start by looking at a website like Manta, which provides this type of revenue estimate.
- Multiply the revenue figures for your competitors it by the percentage in the chart above that best fits with your industry. For example, if one of your competitors in the manufacturing industry earns $1 million in annual revenue, you can reasonably estimate they’re allocating $32,000 a year to their marketing efforts.
From here, compare how your organization stacks up, both in terms of percentage allocated and actual dollars spent. While the actual dollars spent can vary wildly, especially if you're a newer organization competing against well-establish industry players, it can provide more context to help you understand the resources required for them to drive business and build brand awareness and their current level.
Marketing Budgets Are Still Increasing
Before you get too attached to the numbers we just calculated, it’s important to note that the study also found that marketing budgets increased 7.6% across industries in 2020 – a decline from the year before.
This means that, while industries recognize the necessities of marketing budgets, they're working to grow them slowly and spend their money wisely on popular features, such as customer experience (on which spending has increased 71% in the last three years.) And, while the final impacts of the global pandemic are still unclear, many marketing budgets were adjusted to adapt to the crisis, and most likely will continue to be as we move forward.
The takeaway? Your competition isn’t backing down on their marketing - they're being smart on what and where they're choosing to allocate that budget. By gaining a better understanding of how much money they’re spending, you can position yourself in the future to earn your market’s dollars.