This is one of those questions design and marketing companies talk about a lot. It does seem a little like we have made up the figures to keep our own businesses in the black. So, this may seem a bit of an odd thing to say from the outset, but companies that spend nothing on design or marketing can and, a lot of the time, do flourish.
What design and marketing does though, is to help companies stand proud of their competition in the good times and the bad. There will always be houses to sell for a new Estate Agent, there will aways be people requiring a plumber, there will always be food to buy. The difference great design and marketing will do though, is to help these companies and organisations do better in the good times and in the more challenging times.
What design and marketing does though, is to help companies stand proud of their competition in the good times and the bad.
Think of design and marketing in these terms: In a room there are ten widget sellers, times are great and they’re all speaking. You need a widget, so which do you choose? Well, it’s usually either the one speaking the loudest (the one you find first and see the most) or the one that says what you feel is relevant to you (connecting to you in terms of your need – both visually and verbally) or the one you are recommended (but what they say is still important, as the person who recommended them needed to hear them first). So in a crowded market, in good times, what you say and how much you say it is important.
Let’s now think of the same room, it’s a different time, money is tight. There are now only eight widget sellers, but seven of them are whispering. They’ve cut back on marketing as it’s seen as an expense, they say very little to the outside world. However, you have one widget seller who is still speaking loudly and eloquently. This one organisation will more than likely now get the lions share of the widget business.
Obviously this is a really simplistic way of looking at everything, but it does illustrate the importance of branding and marketing at any time. So for those companies that invest in design and marketing, investing wisely is key. Knowing how much to set aside and having a strategic plan of what to do with this money is imperative.
for those companies that invest in design and marketing, investing wisely is key
So what is the ‘right’ amount to invest in design and marketing? First off, lets get some clarity on this. This ‘budget’ should encompass everything that goes towards talking to the outside world. Everything from advertising, social media and sponsorship to printing, merchandising and PR. This investment needs to cover everything which falls into this ‘catch-all’ arena of talking to the world.
The figure you come up with should include everything to do with this catch all arena. It needs to cover all the time and money from concept development, meetings and presentations all the way through to production and implementation. It should most definitely include your time, as your time is valuable.
The next thing we should clear up is that the word ’spend’. This word makes all this seem like an expense, not necessarily a necessity. An expense is something you don’t have to spend. It is something that is deemed ‘a cost incurred’. This is why marketing is always seen as a place to ‘save money’. Organisations seem to value the tangible chunks of equipment more than the intangible ‘ideas’. Phrases like… ‘We didn’t mind investing the extra revenue in this much whizzier widget, because it will help future proof our organisation’ seem to trip off the tongue.
Time spent on design is seen as a luxury though. If you currently ‘spend’ on marketing and design, you probably will be reducing this ‘expense’ as times get harder. Investing in branding, design and marketing is about building a strong foundation for your organisation’s future. It’s about creating a memorable ‘brand’ that builds a bridge between you and a relevant audience. This will change over time, it will say different things and look different to stay relevant. Because to stay alive in your audience’s mind, you need to stay relevant. Investors who see the business need to differentiate themselves in times of doubt, make the most of every opportunity.
…to stay alive in your audiences mind you need to stay relevant. Investors who see the business need to differentiate themselves in times of doubt, make the most of every opportunity.
So these ‘visionaries’ that keep spending on design in tougher times tend to emerge when the going gets easier, even stronger than before. This is due mainly to a much greater “share of voice” (the single widget company talking). So when an category as a whole has reduced its spend, the bold investors stand out from the crowd. On average, those organisations that invest more in design and marketing are more profitable than firms that don’t.
So, how much? What should you be investing?
It’s actually not unheard of for new companies to spend between 75-150% of their annual sales revenue (your income) on marketing and design during the first 2-3 years in business. This would be all around building brand awareness, putting their new product or service ‘top of mind’ for their prospective audience. Think of the ads on TV for products or services you’ve never heard of or seen previously. The spend to build awareness is massive. Because without sales your product is dead in the water.
When your brand is a little more ‘established’ this investment can reduce to 10-20 percent. In an established brand, it is about using what you have and ‘augmenting’ it with new material. Keeping the conversation relevant, keeping your audience interested. This is about managing and growing your brand rather than creating it.
For ‘cash cows’ that are just there to be milked, the finance you put into it can reduce to 5 percent or less. These products are still making profit long after the cost of the investment has been recouped, they are embedded in the mind of the consumer and need minimal investment to keep them ‘top of mind’. On the whole there are also usually newer products in development long before the cash cow emerges. These products will need the greater investment.
So the simple answer to this question is a figure to invest for any product or brand at any stage of its life of between 5% and 20% of its annual sales is reasonable. To illustrate this: if you’re an established company and your yearly income from sales is £60k, you should figure on spending anything from £3k to £12k on design and marketing.
At the end of the day, you want your organisation to be the one that is heard above the others. You also want what is said; to be relevant to your chosen audience and differentiated from your peers and competition. You do need to invest. This is what design and marketing should do for you, so you can concentrate on making the right products or delivering the best service.
You want what is said; to be relevant to your chosen audience and differentiated from your peers and competition.
Now choosing the right partner: Ad agency, marketing agency or branding agency and building a relationship. That is a whole new question.
Puur are here to help. We specialise in delivering unique and ownable identities borne from customer awareness at cost that works for you. We help your audience associate your product or service as a perfect fit to their needs. Give us a call today for a chat about how we can help..