Average Marketing Spend as a Percentage of Revenue Grows

BY Kathy Crosett
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The latest CMO Survey, spearheaded by Dr. Christine Moorman at Duke University’s Fuqua School of Business, is out. With nearly 350 respondents, the survey gives us great insight into marketer plans for the next 12 months. The good news is that business owners and managers understand the importance of marketing. As such, the average marketing spend as a percentage of revenue is expected to grow.

Average Marketing Spend as a Percentage of Revenue Increases

On average, businesses will increase their average marketing spend as a percentage of revenue by 8.7% in the coming year. These businesses will boost their advertising budgets on specific marketing categories as follows:

  • Brand spending +7.9%
  • New service introduction spending +6.1%
  • CRM spending +8.9%
  • New product introduction spending +6.9%

Digital vs. Traditional Media Spending

The planned advertising spending will amount to 12% of the firm’s total budget, on average. A significant portion of this spending generally goes to digital media efforts. In fact, over the next 12 months, businesses will increase their digital media spending by 11.8%. Companies in the consumer services sector and consumer packaged goods sector over- index for their planned digital marketing spending increases at 18.2% and 18%, respectively. That is the smallest growth rate since the August 2016 survey. 

And they will cut their traditional media spending by ‑0.2%. We would need to go back to February 2014 survey to find a similarly-​sized decrease in traditional media outlay. However, you and your clients should keep in mind that not every industry will cut traditional their media spending. Health care operators and communications and media companies, for example, will increase traditional media outlay at 2.67% and 4.38%, respectively. In addition, business-​to-​consumer services companies reported that they are likely to increase traditional media spending by as much at 3.4%. In the local market, this could mean that landscaping services, plumbers, electricians and similar businesses will spend more on traditional advertising media in order to reach their target audiences.

Paid digital media spending will break out as follows:

  • Print 15.9%
  • TV 6.2%
  • Video 4.3%
  • Social 9.8%
  • Display (including programmatic) 8.4%
  • Search 13.6%
  • Radio 1.2%
  • Other 40.1% (sponsorships, trade shows, mail)

Online Revenue

About 13.3% of all revenue is now coming through online channels. Firms that want to make an impact with consumers should continue their digital outreach, especially in industries where online commerce has made the greatest inroads. Education services companies report that 49% of their revenue comes through online channels. In addition, business-​to-​consumer services companies realize 30% of revenue because of their online activity. Keep in mind that this could be through appointment settings for establishments like salons.

Your clients might need a reminder of what their digital profile looks like. You can help them understand by running a Digital Audit on AdMall from SalesFuel. Then, discuss the results and work with them on a plan that optimizes the outcomes of their marketing expenditures for the coming year.