How Successful Companies Spend Their Advertising Budget
Ten percent. This is the portion of revenue that businesses are told to invest in their annual marketing budget. But is this really true? How can we compare a startup company to a well-established brand like Apple? As marketing budgets continue to rise, more companies are choosing to ditch the 10% rule and go after bigger budgets with bigger rewards.
You must always make decisions that are right for your business, but it helps to know what other companies are doing. See where the most successful businesses are spending their advertising budgets.
Marketing Budgets Continue to Climb
According to a recent Gartner study, companies are spending roughly 12% of their annual revenue on marketing. Large businesses spend about 13% while smaller ones spend 10%. Industries make a difference, too. For example, education services spend over 18% of their revenue on marketing and the healthcare industry is expected to increase their budgets by 10%.
Take a deeper look into how these percentages are split up. Between online and offline marketing strategies, marketers must scrutinize where every penny goes.
Marketers spent 9% of their budgets on building and maintaining great websites in 2016-2017. This spending has increased and will continue to do so. The goal of these investments is to create more personalized, responsive, and meaningful user experiences.
- Digital Commerce
In the area of digital commerce, marketers spent 8% of their revenue in this area. Marketers invest here to build better relationships, gain customer insight and secure brand loyalty. B2C companies spend more on digital commerce than B2B companies, with retail and financial services throwing down the largest budgets. The greater the investment, the greater the return. Or so one hopes.
- Digital Advertising
Marketers are raising the bar on their digital ad campaigns. For one, it’s getting harder for organic content to be noticed. Paid content is more likely to reach your audience, so much so that advertisers are expected to spend $300B on paid content by 2019. Second, there are many types of digital strategies like display, native, social, video, and even mobile, making it possible to find something that is effective and affordable.
For example, local advertising delivers highly relevant content based on user location. Customers can be found by zip code, city, state or country. The more relevant the ad, the more likely users are to engage and convert. This is why geo-targeting works. In addition to hypertargeting your audience, you can manage your budget and achieve high ROI. This, with the continuing rise of digital advertising, digital ads are expected to make up 50% of all ad spending by 2020.
- Print Advertising
Although digital advertising is expected to grow so immensely, companies are still committed to traditional print ads in addition to other media channels. These companies include high-end luxury goods, such as watches, jewelry and couture fashion. In 2016, they spent nearly three-quarters of their budgets (73 percent) on print advertising in newspapers and magazines.
Even if you’re not in the luxury good industry, there are still many benefits for spending on print ads. Categories such as travel, real estate, healthcare, and education all depend on print advertising to maximize brand awareness and brand value. “Advertising has experienced unprecedented changes in recent years. Brands, large and small, are now challenged with more options than ever. Critical thinking about how to allocate within the marketing mix is not only needed, but required”, states Jackie Graziano, Vice President of Marketing.
Balancing Your Ad Budget: Digital + Print
When it comes down to it, the most successful companies are spending their ad budgets on the muscle of digital marketing: websites, digital ecommerce, and digital ads. To manage your budget and keep competitive, you must strike a balance between these three areas. But, don’t underestimate the importance of print advertising. The winning strategy is an optimal mix of using both channels. The percent of allocation can vary depending on many factors, but target audience, cost, competition, etc., should be taken into consideration.
Lucrative businesses continue to keep room in their budgets for traditional marketing such as magazine advertising and direct mail. These materials can be aimed at specific audiences and used to strengthen your online message. Because they are physical, print advertising tends to create more memorable brand experiences, and increase persuasion metrics such as brand lift and purchase intent. Digital platforms really work best when they are connected to traditional media like print magazines.
“Digital is the fastest growing category in terms of allocated U.S. ad spend, but there’s one form of media that smart marketers are still obsessed with: Print. Studies continually show that print magazines deliver stronger advertiser ROI even when a lot of other media are in the mix”, stated Linda Thomas Brooks, President and CEO, MPA. To get a deeper understanding of the neuroscience behind print + digital advertising, check out our e-book here.
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