"Half the money I spend on advertising is wasted; the trouble is I don't know which half." [John Wanamaker, Philadelphia Department Store Founder]
Ad spending should be a percentage of sales. The percentage varies depending on industry, with consumer goods leading the pack. It also varies depending on growth targets, brand awareness and company reputation value, and market conditions. In B2B the percentage tends to be lower due to a more circumscribed universe of targets (it makes me uneasy to call people that).
There are indications that even B2B advertisers are increasing their spending. The jump was by 3% in 2006. Total U.S. ad spending will increase by 3.6% in the first half of 2008, with the biggest portion going towards online.
We all know that the first impulse when things get tight with your marketing budget is to pull media placements. At one B2B company where I worked, I had to convince the product marketing people that it was better to pull all advertising than just run one ad per year. You've got to pay attention to frequency with reach. Even in maintenance mode, we needed to be in trade publications for enough months to be present in prospects' and customers' minds. And we had very good adverts, with short copy and attention grabbing headlines (80% of what readers notice besides visuals).
I was reading AdAge Marketers Profile Yearbook and thinking about these ratios for some of the big spenders listed there. The numbers represent only ad spends and not total marketing and sales support budgets. The ranking captures amount of spending, with Procter & Gamble at number one at least two years in a row (I suspect more than that). P&G's net sales in 2006 were $68.2b worldwide and about $29.5b in the U.S. The company's U.S. ad spending almost $4.9b -- a 16% ratio.
Advertising is not conversation, it's a form of communication, and it's one-way. Yet all that advertising can be considered an investment in the future of the company and its brand(s). Things like familiarity and reputation play a role in spending considerations as they have one in purchase consideration. So you look at those numbers -- all big, classic brands with tons of equity behind them -- and you realize that even the industry's most blue chip brands "play by the rules." They're rules established by decades of modern business practice -- rules that really haven't changed through the advent of television, and now the Internet.
Today's corporate budgets are tamped-down, picked-over, and ruthlessly compressed by the rush to milk quarter for maximum profit. Too often, it's tempting to reduce budget for "intangibles" such as advertising. But they're really not intangibles at all, and no social media miracle can change that fact.
Compare the list of companies ranked on the National Marketers report with Interbrand's Best Brands of 2007 and you will see many of the same names. It's not by chance. The Disney company, for example, with a brand valued at $29.2M (an increase of 5%) at number 9 on the Interbrand report, is at number 8 on the AdAge report, with U.S. ad spending of $2.3b.
Look at your top line. Now look at your ad line. Are they really "in-line" for the degree of success you expect? If not, you have the first meeting agenda item of the New Year.