Who Has The Biggest Marketing Budgets?

Marketing budgets are rebounding. They are expected to increase 6.7% in the next twelve
months according to the February 2014 edition of The CMO Survey. This is a sizable increase
over projected increases of 4.3% in August 2013 and a massive boost over the 0.5% increase
reported in February 2009. Bounce!
To put these figures in perspective, The CMO Survey reports that
marketing budgets represent approximately 10.9% of overall firm budgets.
These figures have hovered around this average since this question was first
asked in February 2011. On the other hand, marketing budgets as a percent
of firm revenues improved to 9.3% from 7.9% in 2013 indicating that
marketing budget growth outpaced revenue growth. One question that
survey users often ask about these figures is whether or not they include
salaries for marketing employees. Analysis indicates that these marketing
spend estimates include both employee and non-employee investments in
marketing.
I examined all three marketing spending metrics across several firm and
industry characteristics. These are summarized in Tables 1-3. As shown in
Table 1 across these three indicators, B2C-Product companies have the
largest marketing budgets (as a percent of budgets and revenues) and the
largest expected growth in marketing budgets across the four economic
sectors. I expected a large increase over the B2B companies which may be
reaching customers with their own or their channel’s salesforce. However, I
did not expect to find B2C-Product companies also dominating B2C-
Service companies by 20-30% differences. Would love to hear from
marketing leaders in this sector about this differential.

As shown in Table 2, the smallest companies (less than $25 million) are expected to experience
the biggest percentage change in marketing budgets in the next year (10.5%). These companies
also spend substantially higher percentages of their company’s overall budgets (12.7%) and total
revenues (13.9%) compared to larger companies. Perhaps this is because they are younger
companies and must grow to survive or perhaps it is because they have big aspirations to
dominate their markets. Regardless, larger companies may want to take note of these spending
levels as these up-and-comers are often the same firms that will supplant current incumbents.


Finally, as shown in Table 3, companies that generate a higher percentage of their sales from
the internet also expect to increase marketing spend by a higher percentage and spend more of
their firms’ overall budgets and a higher percentage of their firms’ revenues. Although digital
marketing is generally less expensive, these companies appear to be pouring marketing dollars
into their operations. Like the young firms in Table 2, one theory is that these companies are
spending against the massive opportunity they see in internet sales. A striking figure is that
companies with no sales on the internet spend 6.2% of revenues on marketing while companies
with >10% of their sales from the internet are spending three times this amount—a whopping
18.6% of their company revenues.