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How Much Budget Should a Company Devote to Advertising?

11:14 pm on Jul 16, 2007 (gmt 0)

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What portion of revenue should a company devote to advertising? I've heard widely divergent figures. I suppose it varies according the age of the business, its sales volume and how established its brand presence -

but still, is there any a good rule of thumb, an accepted industry ballpark standard expressed as a percentage of gross sales, some age-old wisdom passed down in MBA programs or whatever?

Please do include your opinions & experiences with all forms of advertising, including print and postal-mail campaigns, not just PPC, banner ads or eMail campaigns.

Beg pardon if this is already answered in other post(s). If so, please do kindly point out the links. Thanks

11:43 pm on July 16, 2007 (gmt 0)

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WebmasterWorld Administrator lifeinasia is a WebmasterWorld Top Contributor of All Time 10+ Year Member Top Contributors Of The Month

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Every industry/location/individual business is too different for a magic one-size-fits-all number. And if you're doing PPC, your spend may vary daily, if not hourly as you constatntly tweak to maximize ROI.
11:51 pm on July 16, 2007 (gmt 0)

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Most big corporations map out percentage-based marketing budgets (i.e., x% of gross profit). I've seen budgets that range from 20-35% of GP, depending on the industry and how aggressively they're marketing.

With AdWords, it is so easy to attribute revenues to marketing dollars that it seems silly to arbitrarily set a budget like this. Barring any cash flow problems, I will continually invest in my AdWords budget until the marginal gross profit equals zero. In other words, the cost of an additional dollar of ad spend will bring in just enough revenue to cover the cost of delivering the product to the customer.

12:19 am on July 17, 2007 (gmt 0)

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Traditional brick & mortar business use to average about 5% of gross sales
depending a lot on your profit margins. In other words for ever hundred
thousand dollars worth of sales you would spend $ 5,000.00 to generate that much volume As far as Internet sales go there is no traditional formula.
However I would never swap dollars and break even. Might as well stay in bed. KF
4:38 am on July 17, 2007 (gmt 0)

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it us a zero sum game... if it is profitable keep reinvesting - use tracking and while roi is good keep going