* The Business of Software

A former community discussing the business of software, from the smallest shareware operation to Microsoft. A part of Joel on Software.

We're closed, folks!

Links:

» Business of Software FAQ
» The Business of Software Conference (held every fall, usually in Boston)
» Forum guidelines (Please read before posting!)

Moderators:

Andy Brice
Successful Software

Doug Nebeker ("Doug")

Jonathan Matthews
Creator of DeepTrawl, CloudTrawl, and LeapDoc

Nicholas Hebb
BreezeTree Software

Bob Walsh
host, Startup Success Podcast author of The Web Startup Success Guide and Micro-ISV: From Vision To Reality

Patrick McKenzie
Bingo Card Creator

Percentage of sales spent on marketing?

I was talking to a consultant and mentioned I'm spending 20-25% of gross sales on marketing (includes a full time marketing person, too much on AdWords, other site advertising, etc).

She checked my (highly competitive) industry and said it should be about 2%, which seems impossible, especially given the prices that are charged in this niche.

I though a rule of thumb was about 30-35% of gross sales should go to marketing.  Can anyone confirm or deny that?

If you're in a competitive niche, what percentage do you spend?
Doug Send private email
Tuesday, May 13, 2014
 
 
I have heard that 10% is OK.
MatrixFailure Send private email
Tuesday, May 13, 2014
 
 
I suspect this will be difficult to answer without knowing which "(highly competitive) industry" you are referring to. However, if you can obtain detailed financial statements from your competitors, you might be able to deduce what you need.
Scorpio Send private email
Tuesday, May 13, 2014
 
 
Good thought Scorpio.  The biggest company in the niche is public, and have SEC filings.  They spend about 35% on sales AND marketing -- which are not the same, but since I don't have a sales staff, they are for me :)
Doug Send private email
Tuesday, May 13, 2014
 
 
2%, where did she get that from? That can't include the cost of paying marketing people, surely?

30% sounds fine to me, as long as you are getting a decent return on it (not always easy to measure).

I probably spend at least 30% of my *time* on marketing related stuff. I don't spend a lot of *money* on marketing though. Just a few percent of annual revenue. I would happily spend more if I thought I would get a decent ROI and I had the time to manage that spending.
Andy Brice Send private email
Tuesday, May 13, 2014
 
 
It's a curve and to simplify a complex subject the right amount is that which maximizes profit for you, not some fixed percentage based on what others are doing.

Consider Kim spends 30% on marketing and makes $20 million annually.

Then Chris spends 1% on marketing and makes $3.50 annually.

Who is right?
Scott Send private email
Tuesday, May 13, 2014
 
 
I spend about 15% of turnover on marketing.  That comprises adwords, adwords consultants, content writers, an a VA to help me with social media stuff.  If I had more time I'd double it and see what effect it had.
Mark Nemtsas Send private email
Tuesday, May 13, 2014
 
 

This topic is archived. No further replies will be accepted.

Other recent topics Other recent topics
 
Powered by FogBugz