The average business spends 5-10% of their annual profits on marketing (according to CMO Survey). In manufacturing, the average budget for marketing is 8% of the company’s annual profits. This guide will help you get a clear overview of how much you should plan to spend on your marketing budget and how to devise your profits accordingly.
The average amount varies significantly based on the size of the company and how established it is. We’ll have a look at how different companies perform based on the number of customers and total annual profits. The following figures represent average spending for manufacturing companies based on annual growth:
- Manufacturing companies that grew by 1-15% in the last year spent 8% of their annual profits on marketing expenses.
- Manufacturing companies that grew by 15-30% in the last year spent 20% of their annual profits on marketing expenses.
- Manufacturing companies that grew by 30-100+% (highest) in the last year spent an average of 50% of their annual profits on marketing expenses.
On average, the higher the growth % of the manufacturing company, the more it spends on advertising. This is partially because new start-up manufacturing companies spend more on advertising and experience higher growth.
Example: If an electronics manufacturer generates $700,000 in annual profits – on average they will spend $56,000/year (8%) on marketing or $4600/month. However, there is no guarantee that same company won’t spend $350,000/year on marketing – or roughly 50%. This all depends on the individual business’s objectives and what they’re trying to achieve.
How Much Should A Manufacturing Company Spend On Marketing?
Read below to find out how much you should spend based on your growth rate. To plan your marketing budget, think about what stage your manufacturing company is at. Is this a new start-up company or are you established and already have a steady supply of customers?
If you’re an early-stage company aka a “start-up” you should spend more on advertising because you’ll need to get your first customers through the door. If you’re established and have a steady supply of customers, you should consider upgrading your production capabilities and lowering your marketing expenses.
- New Manufacturing Companies
- Recommended Spend: 30-50%/year
Start-up companies should spend higher amounts on their marketing. This is usually in the 30-50% revenue range for newcomers. If you don’t have any customers yet and can’t predict what your profits are going to be like, start small-testing with budgets such as $1000-5000 and then gradually ramp-up your ad spend. Instead of risking it all on a large marketing campaign, you need to familiarize yourself with the market and adjust your budget according to the results.
Determine how much you should spend based on the product you’re selling. If you manufacture a unique product which is hard to come by, you could spend as little as an established company (10-20%). If your product is highly popular and easy to find, you should spend the maximum amount possible to stand out.
- Established Manufacturing Companies
- Recommended Spend: 10-20%/Year
Established companies should spend less than start-up companies because they have the momentum and they need little money to stay competitive. The advantage they have over start-ups is a consistent client base that keeps re-ordering from them. This means they only need few new clients to replace older clients and fulfill their manufacturing quota.
On average, an established manufacturing business should spend 10-20% of its yearly profits on marketing. This should be adjusted according to the competition level in your industry. If you’re in a very competitive industry you may want to go above 20%. If the competition is lower, you can reduce spending accordingly.
- Failing/Stagnant Manufacturing Companies
- Recommended Spend: 5-10% More Than Current Budget
If the manufacturing business is struggling with net-negative profits, you need to increase your current budget by at least 5-10%. The marketing budget might not be the only thing affecting your profits (consider product revisions), but if you’re in an aggressively competitive industry then marketing can have a serious effect on the success of your product.
Start by increasing the budget for a trial period of 6 months and see how it performs. If you’re seeing an increase in sales, consider bringing the budget down to the previous levels. If you’re satisfied with that progress, make a decision on whether you want to keep the budget increase.
Have more questions? Call, email or text Sandy, leading manufacturing SEO expert at 775-870-0488.