by Daniel Burstein, Marketing Sherpa Director of Editorial Content|
“You have to spend money to make money,” so goes the old dictum. But is there a correlation between changes in a marketing budget, either up or down, and success?
In this MarketingSherpa Research Chart of the Week, take a look at data from 1,745 marketers to help you make the budget case with your business leaders.
Sometimes, it takes a complex set of steps to reach a simple and powerful answer. I’ll start this MarketingSherpa Chart of the Week with all of the steps we took to get the simple answers to these questions: Are successful companies changing marketing budgets? And, really, in which direction?
First, let me help you understand how we collected the data. In the recently fielded MarketingSherpa Ecommerce Benchmark Study survey, we asked marketers to:
Q. Please indicate the 2013 level of the following metrics and their ongoing trend. Please report all monetary values in U.S. dollars. If you cannot give a reasonably accurate response or are not comfortable disclosing the information, please leave the space blank.
One of the values respondents filled in was “marketing spend,” and they could choose if the spend was rising, steady or falling.
We then wanted to understand not just how all companies were changing marketing budgets, but specifically, what the most successful companies were doing that was different from other companies.
So we correlated this data with a success model computed by Diana Sindicich, Senior Manager of Data Sciences, MECLABS, parent company of MarketingSherpa. To determine which companies were most successful, Sindicich gave weight to 12 factors, with data like “year-over-year difference in annual and ecommerce revenue” and “margin percentage.”
You can see more information about the success model in the complimentary MarketingSherpa Ecommerce Benchmark Study, in which the below chart appeared, constructed based on the Benchmark Study survey responses. The most successful companies in the below chart received a success score ranging from nine to 12.
Many marketers in the Benchmark Study survey mentioned they felt limited by their budgets, like the respondent who said, “Budget restrictions meant we couldn’t develop the online presence we wanted. We developed better customer relations to encourage referrals.”
The most successful companies are more likely to have a rising marketing budget
The above chart should be very reassuring to anyone who works in marketing, and could be used as one data point in an internal campaign to grow your marketing budget.
The more successful a company is, the more likely it is to have a rising budget, and the less likely it is to have a falling budget. As you can see in the chart, 58% of the most successful companies reported a rising marketing spend, while only 6% of companies in the top two success groupings reported a falling marketing spend.
One caveat to consider: Correlation is not necessarily causation. We cannot confidently deduce from this data that the marketing spend is creating or limiting success. It may be that less successful companies have less money to invest in marketing.
Or, it may be that the most successful companies are more likely to invest in general, and the rising marketing budget is but one indication of a focus on investing in and improving the overall company and the way it serves customers.
Requesting the budget you need
Hopefully, this chart is empowering to you. Perhaps you can use it as a good proof point to help you achieve the budget you need to reach your objectives.
But how much should you budget? There are no easy answers to that massive question, but keep this one last point in mind from a survey respondent:
“Whatever budget you arrive at to cover an ecommerce project, multiply it by at least three and you may begin to get somewhere near the reality. However, the ROI can still be totally unbeatable by a similar spend on other activities in the market.”[via Marketing Sherpa]