Allocating Funds for Marketing

There's just no way around it – in today's competitive business atmosphere, a sound marketing strategy is the key to the survival and growth of a business, of any size. It is essential to have a well-formulated marketing plan that has provisions for intelligently allocating funds for marketing. You should be able to maintain the equilibrium between the income and what the marketing department spends. The amount allocated should cover all the costs involved in the various marketing activities. These may be related to advertising, promotion or other expenses.

Effect of the Company's Position on Allocation Amount

The market standing of your company will have a direct bearing on the amount allocated. An established company generally does not need to spend more than ten percent, to cover all its marketing activities. On the other hand, if your company is new, you may have to spend more – up to 25% in some cases. This should not be viewed negatively. It is a well-proven fact that the amount you spend on marketing will pay rich dividends and the return is a multifold increase in income, which more that justifies the amount you spend.

Allocation Methods

There can be different approaches to allocate the funds for marketing, but no approach can have perpetual validity. One approach is allocating a fixed percentage of the revenue for the marketing activities. However, a fixed percentage fund allocation is advisable only if the product(s) falls within a market segment, for which easy prediction of the change in trend is possible. This could prevent becoming a part of the ‘advertising wars' that may affect profitability. If a reduction in sales is detected, it is probably time to reconsider the allocation of a bigger amount, a deviation from the earlier strategy.

Among other possible approaches would be the task approach. Here, instead of a comprehensive marketing strategy, you simply concentrate on the immediate task at hand. Another would be the residual approach, which involves spending only that which can be spared, which of course is against standard principles.

Allocation of funds for marketing is an essential part of the growth and sustainability of any business concern. A well-formulated marketing strategy adopts an approach that matches the requirements of the business and is not necessarily similar to the strategies adopted by your competition.