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Budget Benchmarks!

Bob Brock
President

Marketing benchmarks are hard to come by in higher education, since few institutions track expenditures in any consistent way. One reason is that marketing dollars are invested not just by the central mar/comm. team, but by many decentralized units including individual schools and colleges, academic departments, advancement and alumni offices, admissions, and others.

These unit-driven expenditures cover the waterfront: publications, direct mail, market research, events marketing, paid advertising, external vendors, and promotions. They are categorized in the accounting process under different budget codes, which makes them tough to track. The predictable result is that most marketing managers – and most CEO’s – have little perspective on how much their institutions are investing in communications and marketing.

We’ve compiled proprietary benchmarks for budgets, staffing, and marketing allocations based on 15 years of consulting with institutions of higher education. We’ve worked directly with more than 150 educational institutions and organizations and we’ve analyzed the marketing staffs and expenditures at more than 300 colleges and universities throughout North America.

These benchmarks aren’t industry averages, in the strict sense of the term. They are minimum funding levels for effective marketing. They are intended to be a general – but accurate – guide to what institutions are investing in order to successfully and consistently achieve their strategic marketing objectives.

Of course, every institution lives in a unique environment framed by its age, size, scope, market position, competitive set, reach and penetration, growth strategy, public or private status, and a host of other factors. So taking into account the impact of your own unique internal and external reality is a critical part of interpreting these benchmarks.

The budget benchmarks cited below refer to annual expenditures in the following areas:

  1. All marketing and advertising expenditures
  2. Marketing publications (design, photography, content, and printing)
  3. Creative, marketing, and consulting work by external vendors
  4. All marketing promotions and giveaways
  5. Event-driven marketing
  6. Institutional web design and content (not IT, hardware, or systems costs)
  7. All public, community, and media relations
  8. Salaries for the central marketing communications positions

The benchmarks include advertising and other marketing expenditures from all departments and divisions, but they specifically exclude salaries and operating budgets for decentralized departmental communicators, and the salaries and operating expenses for the recruitment and admissions operations. They also exclude support functions such as web development, design, content, photography, and videography that are primarily for academic use.

So here are EMG’s budget benchmarks, expressed as a percentage of the overall institutional budget:
Non-profit colleges and universities that consistently and effectively achieve their strategic marketing goals typically invest between 1.0% and 4.0% of the overall institutional operating budget to fund the communications and marketing functions identified above. The benchmark range is segmented into three categories based on annual overall institutional expenditures:

  1. Small-to-mid-sized, independent, tuition-driven institutions and regional publicly supported institutions with budgets of under $100 million invest at the higher end of the benchmark spectrum to fund effective brand marketing programs – between 2.5% and 4.0% annually;
  2. Larger regional and national universities with annual expenditures of $100 million to $500 million typically invest in the mid-range of the benchmark spectrum in order to support effective brand marketing programs– between 1.5% and 3.0% of total institutional expenditures;
  3. At the lowest end of the benchmark range – a result of economies of scale from sheer size as well as high levels of research and ancillary income – are very large, publicly funded universities that have $500 million or more in annual expenditures. These institutions typically invest 1.0% – 2.0% of their annual institutional budgets in marketing and communications efforts.

Non-profit colleges and universities in the U.S. and Canada rarely invest at or above the 4% level, although it is not unheard of, and more institutions are approaching or exceeding that level than ever before. Marketing budgets have been steadily increasing for the past ten years both in actual dollars and as a percentage of overall operating budgets. The current investment range of 1% – 4%, for example, has increased from a range of 0.75% – 3.0% in 2000. Increases during the past decade have been due to rising costs of marketing and rapidly increasing competition for the best and brightest students, private funding, and research grants and contracts.

The benchmark ranges do not take into consideration the impact of the recent economic downturn on higher education marketing. No solid data exists on reductions in marketing investment by colleges and universities since the economic crisis began in late 2008. However, anecdotal information suggests that some institutions reduced their marketing expenditures during 2008-09 by between 10% and 15%. At many institutions, reductions came primarily in advertising and promotional expenditures (which sometimes saw cuts of 20% to 30%), rather than in staff. However, a number of institutions have reported temporary hiring freezes or delays.  We are expecting these marketing budget cuts to be short term.

This investment level is quite modest when compared to the for-profit educational sector. For-profit institutions invest at significantly higher levels, and reap commensurately higher rewards. Investments of 10% to 20% (or even more) of total operating budget are common in the corporate sector.

For example, in 2008, for-profit Strayer University, which has seen rapid market share growth in recent years and opened 13 new campuses in 2010 in Arkansas, Louisiana, Mississippi and Texas, invested approximately 18% of total revenues ($93.3 million of expenditures on annual revenues of $511 million) in combined marketing and recruitment operations.

Similarly, the market leader, University of Phoenix (Apollo Group), invested approximately $416 million in advertising and promotional costs in 2008 (not including sales/recruitment costs), or about 13% of total annual expenditures.

Even at that level, Phoenix showed a profit of $476 million for the year. It is important to remember that non-profit universities increasingly compete with for-profit organizations such as the University of Phoenix in their regional adult-consumer marketplaces and, increasingly, among traditional students.

There is little doubt that were institutions of higher education to invest wisely at significantly higher levels – between 4% and 6%, for example – they would be able to achieve a return on investment that would more than justify the additional investment. However, given the history, heritage, and mission of non-profit educational institutions, it is doubtful that many would have the appetite for such increases, at least in the near term.

EMG’s full 22-page Marketing Benchmarks Guide includes detailed benchmarks along with actual data tables showing institutional investments in each category. The Guide also includes examples of typical staffing patterns, and a table outlining successful marketing allocation percentages for staff salaries, advertising, public/media relations, Web development, external contracts, and publications.

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