How much do companies invest in advertising and marketing?
Posted: Tue Dec 10, 2024 10:41 am
Although the decision to invest in marketing is unique to each company, industries have a tendency to reference competitors when preparing their annual budget. In light of this, the firm Schonfeld & Associates issues a report with the ratio of advertising and marketing investment in relation to sales. This report consists of a compilation of the ratios of more than 5,000 companies grouped into nearly 330 industrial sectors in the United States.
This report is a good reference for a large part of the western market sectors, since the main global companies in the United States are included in the calculations made by the firm responsible for the study.
10%, the magic ratio in advertising and marketing
According to various reports from gambling data usa financial firms, on average companies spend at least 10% of sales on advertising and marketing expenses . However, this ratio has changed due to the dispersion of the data obtained, since there are sectors which have maintained this expenditure intensity, while others have decreased significantly.
It can be said that the ratio is on average less than 10%. Therefore, companies must be more effective in the execution of their advertising and marketing budget in order to gain ground with the ROI generated.
→ Download now: 12 free templates to create your marketing and digital marketing budget. Completely customizable.
Highlights of the 2017 report
Of the more than 330 categories, only 27 have a ratio above 7%. Regrouping these 27 industries by subsector, it is clear that mass consumption is the one that allocates the most resources in millions of dollars (USD 22,557MM), which represents 12% of sales. The second subsector with the highest expenditure is the departmental or individual category sector (USD 21,116MM), equivalent to 14.49% of sales. With these data, it is not bold to say that the more competitive the market is, the greater the efforts in advertising and marketing will be.
Investment in Advertising and Marketing for Mass Consumption
Investment in Departmental Advertising and Marketing
Schonfeld & Associates
It is also important to note that in industries where the market is dominated by a few companies , the advertising and marketing ratio that they dedicate is lower than that invested by other competitors. This is much more noticeable in those globalized companies whose brand message is unified or, at least, focused by region.
The other subsectors worth highlighting in the report are the literary and audiovisual content sector (USD 16,741MM; 6.61%), the services sector (USD 9,495MM; 17.26%) and the financial sector (USD 394MM; 16.25%). Both the services and financial sectors have a high ratio because they must devote greater efforts to communicating, informing and attracting the attention of customers about the products they offer and their respective benefits.
Advertising and Marketing Investment
Advertising and Marketing Investment in the Services Sector
Investment in Advertising and Marketing Financial Sector
Source: Schonfeld & Associates
Where are the digital businesses?
Well, they are immersed in the computing category. The ratios in this sector are low, but this does not mean that investment in advertising and marketing is insufficient, since the main channel for promoting digital businesses is obviously digital. The difference between advertising in digital media and traditional media is that the advertising space on the Internet tends to be infinite, so its costs tend to be lower.
Furthermore, advertising in digital media is more effective at reaching consumers at the moment of their purchasing decision than through traditional media. On a Friday night, a consumer might see a TV commercial for sports shoes that catches their attention. From that moment until they go to the store to make the purchase, thousands of distractions can occur that can cause them to change their purchasing decision. On the other hand, having seen that commercial in a digital medium and having a buy button there increases the probability of success of that sale.
In conclusion, knowing the ratio of investment in advertising and marketing with respect to sales in the industry where you compete is important to have criteria for planning said investment. Also, managing a budget under this parameter forces you to be more effective in the use of resources without neglecting the expected return. In this sense, using digital media to promote your business is a smart decision to make optimal use of the budget .
This report is a good reference for a large part of the western market sectors, since the main global companies in the United States are included in the calculations made by the firm responsible for the study.
10%, the magic ratio in advertising and marketing
According to various reports from gambling data usa financial firms, on average companies spend at least 10% of sales on advertising and marketing expenses . However, this ratio has changed due to the dispersion of the data obtained, since there are sectors which have maintained this expenditure intensity, while others have decreased significantly.
It can be said that the ratio is on average less than 10%. Therefore, companies must be more effective in the execution of their advertising and marketing budget in order to gain ground with the ROI generated.
→ Download now: 12 free templates to create your marketing and digital marketing budget. Completely customizable.
Highlights of the 2017 report
Of the more than 330 categories, only 27 have a ratio above 7%. Regrouping these 27 industries by subsector, it is clear that mass consumption is the one that allocates the most resources in millions of dollars (USD 22,557MM), which represents 12% of sales. The second subsector with the highest expenditure is the departmental or individual category sector (USD 21,116MM), equivalent to 14.49% of sales. With these data, it is not bold to say that the more competitive the market is, the greater the efforts in advertising and marketing will be.
Investment in Advertising and Marketing for Mass Consumption
Investment in Departmental Advertising and Marketing
Schonfeld & Associates
It is also important to note that in industries where the market is dominated by a few companies , the advertising and marketing ratio that they dedicate is lower than that invested by other competitors. This is much more noticeable in those globalized companies whose brand message is unified or, at least, focused by region.
The other subsectors worth highlighting in the report are the literary and audiovisual content sector (USD 16,741MM; 6.61%), the services sector (USD 9,495MM; 17.26%) and the financial sector (USD 394MM; 16.25%). Both the services and financial sectors have a high ratio because they must devote greater efforts to communicating, informing and attracting the attention of customers about the products they offer and their respective benefits.
Advertising and Marketing Investment
Advertising and Marketing Investment in the Services Sector
Investment in Advertising and Marketing Financial Sector
Source: Schonfeld & Associates
Where are the digital businesses?
Well, they are immersed in the computing category. The ratios in this sector are low, but this does not mean that investment in advertising and marketing is insufficient, since the main channel for promoting digital businesses is obviously digital. The difference between advertising in digital media and traditional media is that the advertising space on the Internet tends to be infinite, so its costs tend to be lower.
Furthermore, advertising in digital media is more effective at reaching consumers at the moment of their purchasing decision than through traditional media. On a Friday night, a consumer might see a TV commercial for sports shoes that catches their attention. From that moment until they go to the store to make the purchase, thousands of distractions can occur that can cause them to change their purchasing decision. On the other hand, having seen that commercial in a digital medium and having a buy button there increases the probability of success of that sale.
In conclusion, knowing the ratio of investment in advertising and marketing with respect to sales in the industry where you compete is important to have criteria for planning said investment. Also, managing a budget under this parameter forces you to be more effective in the use of resources without neglecting the expected return. In this sense, using digital media to promote your business is a smart decision to make optimal use of the budget .