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Those seeking a definitive formula that defines how much to budget for marketing and PR will be disappointed. A general guideline is to invest 10 percent of your gross annual income in marketing, including public relations.

In the real business world, marketing and PR spending range across the board. In his recent blog post, Michael Monahan, director of media relations for Tech Image, points to research studies that can help organizations plan their PR and marketing budgets. A Gartner study determined that companies spent 10.2 percent of their revenue on marketing in 2014 on average. Yet the same research also found that spending on marketing as a percentage of revenue varies widely: 46 percent spend less than 9 percent of revenue, 24 percent spend between 9 percent and 13 percent, and 30 percent spend more than 13 percent.

Larger vs Smaller Companies

The larger the company, the higher the marketing expense as a percentage of revenue. Those with revenue of $5 billion or more reported 11 percent, compared with 9.2 percent for those with revenue between $500 million and $1 billion.

Half the companies Gartner surveyed planned to increase digital marketing and overall marketing spending this year, the average increase being 17 percent.

Other research presents different results. SiriusDecisions found that smaller companies tend to spend a larger share of revenue on marketing than larger companies. Non-software companies with revenues of less than $100 million spent between 3 percent and 10 percent of revenues on marketing. Larger non-software companies with revenues of more than $5 billion, spent between 0.5 percent and 5 percent of revenues on marketing.

According to IDC, software companies spend the most on marketing, a weighted average 7 percent of revenues. That compares to 4.5 percent for tech companies overall and 1.9 percent for services companies. IDC also reported that about half of IT companies increased marketing spending in 2014. It found that companies of all sizes, especially those with less than $1 billion in annual revenue, significantly increased marketing spending and investments in outsourced services increased, as organizations seek specialized skills and flexibility

According to IDC, companies spent 3.8 percent of their marketing budget on public relations in 2014, 5.7 percent on branding and content, 1.9 percent on social marketing and 1.1 percent on analyst relations, functions often handled by a PR agency.

Avoid Cost Center Labeling

Inc. contributor Drew Hendricks argues that following a formula to set a PR budget is a mistake because it establishes marketing and PR as an expense, a cost center, rather than an investment that returns dividends. Spending on PR should be determined by how much the investment returns. If PR is leading to increases in sales and revenue, then the best tactic is to increase PR spending until income plateaus.

Many businesses can increase revenues faster by dedicating more time and money to marketing, perhaps even 20 or 30 percent of anticipated gross revenue, especially new companies and products. In other instances, organizations will be able to spend less on PR.

So, how much SHOULD companies spend on marketing and PR?

Answer: ENOUGH.

ENOUGH is enough to create sufficient demand to:

1) meet revenue growth targets

2) fill the sales pipeline.

Continually and carefully measuring marketing and PR results helps identify the most effective and cost-efficient methods to produce targeted growth and fill the pipeline.

Then ENOUGH can be adjusted to reduce the marketing spend or ENOUGH can be increased to produce greater growth.

Savvy companies opt for growth, not budget reductions.

Bottom Line: While 10 percent of gross revenue seems the accepted guidepost for setting marketing and PR budgets, the reality is that marketing spending varies immensely depending on the organization’s size, strategy, and stage in the business cycle. The challenge for all marketing and PR departments is to figure out how much is enough.

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William Comcowich

William J. Comcowich founded and served as CEO of CyberAlert LLC, the predecessor of Glean.info. He is currently serving as Interim CEO and member of the Board of Directors. Glean.info provides customized media monitoring, media measurement and analytics solutions across all types of traditional and social media.