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Marketing Budget Benchmarks

Bob Brock
President

Since the economic downturn began in late 2008, marketing budgets at many institutions have been slashed.  Cuts of 25% – 30% or more in ad spending have not been unusual at colleges and universities during the past year.

Not surprising:  Marketing budgets make tempting targets for CFO’s who need to make tough calls on where and how to save money.  It’s less painful to cut back on media than to cut back on staff.  In the face of 10.2% unemployment, it’s hard to argue with that.

But here’s the surprising thing:  Budget cutbacks are almost always made blind, without anybody really knowing how much or how little the institution is investing in marketing, or where.  Important decisions would be a lot more strategic if they were driven by a little hard data – at least to the point of knowing whether it’s fat or muscle being cut.

Getting a handle on overall annual marketing expenditures is critical for lots of reasons.  It’s imperative if you want to understand whether or not you’re achieving a return-on-investment and if your strategies and tactics are as cost-effective as they could or should be.   If you don’t know how much your institution spends on marketing, it’s impossible to determine how to best allocate marketing resources.

Even so, I have yet to work with a university CEO who has any idea of how much they are spending each year on marketing.  They have no idea.

Do you?

If not, it’s time to do an assessment – on your own or through a consultant.  Overall marketing investment can be a difficult number to come by because of higher ed’s penchant for distributive marketing.  Usually, lots of departments contribute something to the marketing pot – publications, advertising, or events promotions, for example.  You should include the marketing, advertising, publications, outsourcing, and promotional investments from them all (except for department staff salaries).

Here are national investment benchmarks, gleaned through years of assessing all sorts of campuses:  Most colleges and universities invest between 1.0% and 3.5% of the overall institutional operating budget for marketing and communications activities (including salaries for the central mar-comm staff but excluding departmental staff salaries and admissions salaries and operating budgets).

The benchmarks are strongly dependent on the size and scope of your institution, its brand architecture, marketing objectives, geographic reach, audience demographics, and overall approach.  In most cases, small independent colleges invest at the high end of the spectrum (2.5% – 3.5%) and large research universities are at the low end of the range (1.0% – 2.5%).

To place the benchmarks in perspective, Dr. Philip Kotler, the S.C. Johnson & Son Distinguished Professor of International Marketing at the Kellogg School of Management at Northwestern – one of the most widely recognized experts in integrated marketing – has suggested that colleges and universities (and other non-profits) can and should invest up to 4.0% of operating budget to achieve impact and return on investment.  While it’s rare to find institutions investing that much, marketing investment levels have been inching higher and higher over the past 10 years (disregarding the economic downturn), up from a range of 0.75%-2.5% in 2000.

One thing is certain, though:  if you’re overall investment is 1.0% or less, you probably don’t have the resources you need to be effective; and if you’re spending more than 3.5%, you’re comparatively profligate.

By contrast, private for-profit institutions invest at much higher levels: Costs of 10% to 20% (or more) of total operating budget are common in the corporate sector.  For example, in 2008, the University of Phoenix (Apollo Group) invested about $416 million in advertising and promotional costs (not including recruiter salaries/bonuses) or about 13% of expenditures.  And Phoenix still showed a profit of $476 million.  It is important to remember that your institution competes with the University of Phoenix in the consumer marketplace.

Take some time to understand how much your institution invests in marketing – it will be well worth the effort!

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