In 2015, I thought to myself, “If I were in the market to hire a digital PR firm, what is the No. 1 question I would like to have the answer to before talking to them?”
My “A-ha!” moment came when I tried to answer the question, “How much should I spend on PR?”
I decided to write about the subject, and the blog that followed became the single most-read piece of content on the Tech Image site over the past three years. It’s been published, plagiarized and viewed more than a thousand times.
There’s a reason for that: It’s an incredibly important question. It drives the decisions of CMOs and other communications and public relations executives make about staffing, programs, resources and agency partnerships.
And I stand by my answer from three years ago: “It depends.”
Following the Money
According to Gartner, marketing spend was 11.3 percent of revenues in 2017. Deloitte believes this number will remain relatively stable this year, as it expects 2018 marketing spend to comprise 11.1 percent of annual revenues.
Deloitte predicted 2018 spending on B2B marketing would lag behind B2C marketing, with companies spending between 9.6 percent and 11.8 percent on marketing B2C products and services, but only 6.3 to 6.9 percent on marketing B2B products and services.
Deloitte also noted marketing spending varies greatly across industries. Consumer services, perhaps unsurprisingly, generated the highest marketing spend as a percentage of revenues at nearly 19 percent, followed by education; technology; software and biotech; and banking, finance, and insurance.
Technology, software and biotech companies will spend just under 10 percent of revenues on marketing, according to Deloitte. IDC came up with an even lower number for this sector: 2.4 percent. However, IDC acknowledges that “this percentage varies widely by company size, sector, sales model, and growth.”
By applying IDC’s percentage of marketing program investment mix to the Deloitte’s marketing investment by industry, we can begin to paint a picture of what a hypothetical technology company – those most similar to the majority of Tech Image’s portfolio – might spend on public relations activities.
For example, if we take this hypothetical technology or software company and assume it has $100 million in annual revenues, we can infer that organization might spend between $2.4 million (if we use the IDC number) and $9.7 million (if we use Deloitte’s number) per year on marketing, taking into account IDC’s comment that marketing spend varies widely.
By further applying the percentages provided by IDC, which is specific to technology companies, we could expect this $100 million company to spend between $79,200 and $320,000 per year on public relations, between $43,200 and $174,600 on social media marketing, and between $38,400 and $155,200 on analyst relations.
While these numbers are hypothetical, several sources say this level of investment is poised to grow in the coming years.
Marketing Spending is on the Rise
Deloitte’s CMO Survey 2018 found that survey participants expect an 8.9 percent increase in marketing budgets in the next 12 months. Deloitte expects technology, software and biotech companies will see some of the highest growth in their marketing budgets this year – 12.4 percent, ranking behind only energy, healthcare, and communications and media.
Separately, in 2017, members of the Association of National Advertisers said they plan to increase overall spending on public relations over the next five years. Deloitte also said spending on digital marketing would increase by more than 15 percent in 2018 – the highest increase it has reported since August 2011.
“IDC’s research shows that tech companies’ growth and revenue have become increasingly reliant on capabilities that only marketing can provide,” said Kathleen Schaub, IDC’s vice president of the CMO Advisory and Customer Experience practices.
Ewan McIntyre, research director with Gartner for Marketers, added in a separate release, “As CMOs survey the landscape, one thing is clear – previous budget increases have come with weighty expectations, some of which have yet to be met.”
McIntyre’s comment puts a nice bow on the main issue: closing the gap between expectations and execution. Meeting the lofty goals with which businesses tax their marketing department following budget increases can be a real challenge for internal resources to manage – which is where hiring a PR firm may end up making great sense.