Establishing Your Marketing Investment Part Two
by Mark Levit
In a previous article we reviewed the most common budgeting exercise. It’s the most common organizational budgeting method, but not the most efficient.
The first consideration to make is your brand’s Competitive Position and Market Environment.
BUDGET DICTUM 1: The higher the market share, the higher the marketing investment.
The single most important determinant of absolute marketing investment levels is the share of the served market enjoyed by business. Since most marketing managers estimate their budgets using the traditional sales ratio based on an industry average, this comes as no surprise. When all competitors base their marketing budgets primarily on what others in the industry spend, “share of voice” mirrors “share of market.” In many markets, managers may safely take share of voice as a “proxy” for market share, but must be cautious about using the theory that “share of voice” equals market share.
Smaller businesses with under 10% market share tend to invest a larger portion of their marketing budget on media advertising. Larger-share businesses tend to invest about one-third on media and two-thirds on sales promotion. Small-share companies may emphasize media advertising to achieve brand awareness, crucial for future sales growth.
In subsequent articles we discuss the nine additional Budgeting Dicta to help you invest in your business wisely.
If you’d like to discuss the budgeting cycle and how to plan for it, contact our Managing Partner, Mark Levit at 212.696.1200 now.