It’s a logical question. One that many marketers are thinking more deeply about these days, and for good reason. The expectation is that marketing and advertising should be more accountable. With more sophisticated marketing measurement tools and increased digital spend, there’s no reason you shouldn’t be able to quantify the results of your marketing investments.
However unlike other more established business disciplines, marketing and advertising measurement best practices are still being formed. So how do you determine how much budget to allocate to the measurement of your programs?
How much is “normal” to invest in measurement and reporting?
In my research I’ve seen everything from 2% - 20% of your overall budget recommended, but to really understand what this relates to you need to be specific about what is included in the figure.
So it depends, and there is no perfect answer or clear best practice as of yet. However, there are various perspectives and guidance that can be analyzed to develop a reasonable approach.
For starters, you need a minimum level of spend to think in terms of a percentage allocation. For example 5% of a $1 million dollar media budget makes sense, whereas 5% of a $25K asset development budget might not get you very far, or at least would provide only rudimentary metrics.
Ultimately though you should never think of measurement as an optional nice to have. You should always establish key performance metrics and have a method to track the success of your programs, whether it’s manual of via a more sophisticated tool or system.
As such, tasks such as initial set-up and configuration of measurement systems should likely be treated as a separate type of cost. This would be distinct from the dollars you will invest in measurement of ongoing performance, for providing regular reporting and generating optimization recommendations to test.
To provide perspective from what others think on the subject of budget allocation for marketing and advertising measurement, I’ve aggregated reviewed examples of the best thinking that I could find publically available online.
Jim Sterne a well-respected expert in the field of web analytics takes a firm stance and argues that 20% of your marketing budget should be allocated towards measurement. His view is more holistic and includes both measurement and optimization. You can read more of his thoughts here: http://www.clickz.com/clickz/column/2026285/investment-measurement
Keith Dawson of The CMO Site launched a simple online poll to ask: “what percentage of your marketing budget is devoted to analytics?” Here are the responses thus far:
Image Source: http://www.thecmosite.com/author.asp?section_id=1200&doc_id=205085
A quick analysis of the results shows that the most common answer is less than 5%, certainly a far distance from Jim’s 20%. However a key difference here is that Jim has made a recommendation on what to allocate, whereas those responding to Keith’s poll in theory are reporting what they do currently spend.
My simple recommendation would be to start with 5% of your project budget devoted to measurement and reporting. Treat system configuration and measurement tools set-up as a separate cost. Also begin by reserving 10% for optimization.
For additional perspective on measurement budget allocation here’s a list of articles and whitepapers to get you started:
http://www.clickz.com/clickz/column/2026285/investment-measurement
http://www.thecmosite.com/author.asp?section_id=1200&doc_id=205085
http://www.contentmarketinginstitute.com/wp-content/uploads/2011/12/B2B_Content_Marketing_2012.pdf
http://www.ragan.com/Main/Articles/6_ways_to_determine_your_PR_measurement_budget_43450.aspx
http://www.omniture.com/offer/357
http://www.marketo.com/library/definitive-guide-to-marketing-metrics-marketing-analytics.pdf
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