How Much Marketing Is Enough?

Last week Ralph Grabowski presented at the monthly BPMA meeting.  The title of his presentation “Tools to Convince Management of Your Investment in the Voice of the Customer” inadequately described his message – that Marketing expenditures should exceed Engineering expenditures by 2.5:1 or more!

Given the technology focus of Boston area companies, with a high concentration of hi-tech, bio-pharma, and green oriented companies this statement might be viewed as heresy and unbelievable.

However, Ralph is an MIT educated engineer and has real world examples to back up his claim, both for success and failures.  The data can be found on his web site:

What I especially like is his definition of what he includes in Marketing:

  • budgeting the resources and time – the Marketing/Engineering Investment Ratio™
  • conducting primary and secondary market research
  • developing strategy
  • articulating the value of the technology
  • understanding the potential customer
  • modeling both the customer’s business, and your own
  • calculating customer payback
  • quantifying customer needs
  • specifying the product – guiding engineering
  • thinking through the “6 P’s and a D”
the 6 P’s 1 – Price
2 – Performance
3 – Payback
4 – Packaging
5 – Positioning
6 – Promotion
and a D D – Distribution
  • questioning and surveying the customer
  • analyzing and reporting customer survey data
  • segmenting the market
  • sizing the market
  • scrutinizing the food chain
  • creating channels of distribution
  • surfacing competitive intelligence
  • developing an unfair, defensible, and decisive competitive advantage
unfair you have it, and the competition does not
defensible protected, as with patents
decisive compels purchase decisions
  • realizing value from intellectual property through patents and technology licensing
  • building strategic alliances
  • guiding promotion motion
  • guiding selling motion
  • guiding support
  • steering the enterprise

In short, all the tasks that fall to a Product Manager in developing and delivering a product to the market place.

In our discussions with hi-tech B2B companies in the Boston area, we have observed Marketing departments which are still staffed at levels 50% below where they were in 2008, while Engineering and R&D are down 10-15%.  At the same time, Management is turning to Marketing and asking for increased leads, new product launches and increased market share.

Suggestion – review Ralph’s work.  Discount it by 50% (i.e. Marketing expenditures, not including promotion and selling, should be 1.25% higher than engineering expenditures) to reflect the 2010 environment and just to be cynical.   Compare it to the ratio of Marketing expenses (less promotion and selling) to Engineering/Development expenses in your company.  Then look at the company goals for 2010 and 2011.  Are they in-line or is more investment in Marketing required?

If they are out of line, do you have a plan of action aimed at resolving this?  And no, cutting Engineering/Development expenses is not an option.

Shameless Plug: Fire Alarm Marketing offers a Marketing Health Check which covers the points that Ralph makes as well as a company’s overall strategy.  You can get the details here:

RHM  6/24/2010

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