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How Much Does a Company Spend on Advertising?

Advertising is a major expense for many companies, allowing them to promote their products and services to customers. But advertising budgets can vary widely depending on the size of the company, industry, and goals of the advertising campaigns. Here is some background on what goes into advertising spending.

Typical Advertising Budgets

As a percentage of company revenue, typical advertising budgets range between 5% to 15% in industries that rely heavily on advertising, such as consumer packaged goods and retail companies. The consumer electronics and automobile industries generally spend around 2% to 3% of revenue on advertising. Of course, online companies like Facebook and Google devote the highest percentage of revenue to advertising and promotion, at times exceeding 80%.

New companies often set aside at least 30% of gross revenues for advertising as they try to gain market share, while established companies may only require 5% for maintaining brand awareness. On average across all industries, company advertising budgets tend to be around 10% of revenue.

Where the Money Goes

The exact budget breakdown varies greatly depending on the company and industry. Television, print publications, radio and online ads account for the majority of ad spending. Trade shows, direct mail and other forms of promotion are also common line items in ad budgets. Market research is generally considered a separate supporting activity but essential for shaping effective advertising strategy.

Personnel costs also factor into advertising budgets. Most companies devote headcount purely for internal advertising management and creative roles. Larger companies maintain full service advertising teams and agencies on retainer.

Setting the Budget Amount

Companies take both a financial and marketing-driven approach to setting an advertising budget. Financially, they benchmark against industry averages and what the company can afford based on budget thresholds. From a marketing perspective, companies determine what advertising investment is required to achieve growth targets and assess metrics like customer acquisition cost per dollar spent. The goal is to optimize advertising ROI while also scaling ad budgets aggressively enough to meet increased demand.

As with any major expense, advertising budgets are reviewed regularly and shifted across campaigns, channels and creative formats depending on what delivers the best results. Tracking performance and flexibility to adapt to changing market conditions makes advertising dollars go further towards business goals.

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