How much should a company spend on marketing?

"How much should our company spend on marketing?" is a question that generates either silence or confusion in many companies. Sometimes both at the same time. "Don't spend a dime more than absolutely necessary," is the usual advice from some corner office. If it is necessary to err, then let it

Although not very direct or decisive, only one answer determines how much should be spent on marketing, "It all depends." And it does.

It all depends on what a company wants to accomplish - what marketing goals and objectives it seeks to achieve. If a company is launching a program or ready to impact in a new market, marketing costs should be significantly higher. If the company is maintaining a marketplace presence, expenses should be lower. A marketing budget is a reflection of what is to be accomplished.

Beyond these basic concepts are five guidelines for thinking through the goals and objectives and creating an effective marketing budget.

1. Plan the budget for a period of at least one year. "We don't really know what we want to spend. We'll see how it goes. If the program produces results, we'll spend more." If this is the way the business is run, marketing won't help. The only effective way to develop a marketing program is to make a commitment and that includes time - at least a one-year period. Marketing is not an instant fix. Successful marketing develops a cumulative effect in that the results increase over a period of time. Just like anything else that's of value, marketing takes time. Companies not allowing sufficient time cannot benefit from marketing.

2. Plan a budget that reflects the business. A successful New York TV production company asked a marketing agency to review its customer materials which included a brochure, presentation folder and assorted insert sheets and flyers. Even though the company's product - video programs - were in full color, its marketing information was one- and two-color. In addition, the average invoice submitted to its Fortune 1000-type customers came to about $25,000. Yet the principals were marketing their firm using inappropriate materials. Of course, color costs more. But the budget must reflect the business.

3. Don't commit the entire budget to one or two activities. Maximize the impact of a budget by creating programs that develop a synergistic relationship so that the whole becomes greater than the sum of the parts. This takes talent, skill and effort, but the results are rewarding. Spending the entire budget on a magnificent brochure is a waste of money, in most cases. Nothing is left to attract prospects so the brochure can be used! Committing the entire marketing budget to a series of ads is both easy and expensive. It is also far less effective than rolling out a program that includes a number of elements that will impact various markets and audiences in a series of ways.

Any marketing program (and budget) should include three components: self-promotion, media relations and advertising. The judicious melding of these components creates a much more powerful program without increasing the budget.

4. Match the budget with the goals. When it comes to marketing, many executives appear to live in a fantasy world. They expect - sometimes even demand - unrealistic results because they are unwilling to provide the budget required to reach the objectives. "We want to spend $ 100,000 and here are the markets we want to develop," stated the company president. What he wanted to accomplish required a national campaign, including extensive direct-mailing, trade show participation and advertising. A realistic figure would have been $250,000.

5. View the marketing budget as an investment in the company's future. "What's the return on my investment in marketing?" is a common question. Here are several appropriate answers:

* Staying in business. Companies that refuse to market adequately and consistently most often go out of business.

* Staying ahead of the competition. One achievement of marketing is to differentiate companies from the competition.

* Creating a flow of prospects. Marketing creates prospects who want to do business with you.

* Bulletproofing customers. Getting new customers is important, but so is keeping those you have. A marketing program should emphasize why it is in the customer's best interest to continue to do business with you.

You can't get blood out of a turnip, and you can hit the target with a BB gun. It's also impossible to implement a successful marketing program with meager or inadequate funding. A marketing budget that will produce the desired results should be a reflection of both the business itself and management's objectives for the company. When this occurs, there will be sufficient dollars to achieve the goals.

John R. Graham is president of Graham Communications, a marketing services and sales consulting firm founded in 1976. Graham is a prolific writer of business, marketing, and sales articles which appear regularly in a wide variety of regional and national publications. His firm can be contacted at 40 Oval Road, Quincy, MA 02170(617/328-0069).