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How much are other colleges spending on marketing?
With the exception of “What does the org structure of the marketing department look like at other colleges?”, this is the most common question I hear from our clients. Our sense is that on most college/university campuses, the marketing budget is increasing. Yes, increasing…..in spite of the economy and in spite of all the budget cuts you’re reading about in the Chronicle and IHE pretty much daily. This might sound odd but keep in mind that much of the change is due to a) the fact that many institutions were spending very little on marketing in the first place and b) the fact that with the sophistication of higher ed marketing operations, many institutions are simply collecting marketing dollars that were dispersed across the campus into a centralized budget.
Outside of higher education, there is pretty good data on how much an organization should be spending on marketing. MarketingSherpa put out some data in June 2010 that said small organizations (less than 100 employees) typically invest 11% of their gross revenue to marketing. The investment for medium-size organizations of 100-1000 employees (which would be the size of many colleges) was 9% and large organizations were said to invest 6% of gross revenue.
The Small Business Administration (SBA) references an old adage….that 2% to 3% of your gross revenue should be dedicated to marketing. But, they rightfully warn that this would vary dramatically based on an organization’s goals. If your institution is attempting to dramatically increase enrollment or change your image, you need to invest more.
Drew’s Marketing Minute says your marketing budget should be 2% to 8% and he notes that McKinsey is often quoted as recommending 5%. He says organizations with less than $5M gross revenue should be shooting for 7-8% while organizations with $100-$300M in gross revenue should be spending 3-5%. He also gives some percentages by industry:
- Consumer package goods: Up to 50% of projected net sales to launch a new product
- Industrial B-to-B: 1% of gross sales
- Retail: 4-10% of net revenues
- Banks/Credit Unions: 2-5% of assets
- Law firms: 1-4% of gross revenues
- Pharmaceuticals: Up to 20% of net sales
- Hospitals: 1% of net revenues
Higher education is often compared to healthcare…..so the 1% hospitals are investing is probably a decent benchmark. However, almost all my clients are spending much, much less than 1% of net revenue on marketing.
Business Owner’s Toolkit gives some figures by industry. But, they list “education” as spending 5% of gross sales on advertising. I have no idea how the category of education is defined but I’m sure that’s not representative of your typical 4-year, non-profit institution.
Inside of higher education, there have been a couple of attempts to provide some insight into the issue of marketing budget size. In March 2011, LeadsCouncil announced the findings of a study it conducted with CUnet. The findings are based on responses from 293 professionals working in marketing at a college or university. I’m not sure how many actual schools this represents or what the distribution of respondents looks like by geography, type or size of school, etc. You might still be able to get a full copy of the report via email here. Regardless, you are going to want to take the findings with a grain of salt because they might only include for-profit schools. I can’t tell from the press release.
In 2010, CASE and Lipman Hearne conducted a study on marketing spending; it reported on 212 CASE member institutions and included liberal arts colleges, master’s-level universities, research institutions, and 2-year schools. But, it also included independent primary and secondary schools. The median marketing spending was reported as about $500k for small schools of under 2,000 students, $800k for medium-sized institutions up to 6,000 students, and $1.4M for larger institutions. But, all of these figures are asterisked for small sample size.
The bottom line is that solid benchmarks on how much colleges and universities are spending on marketing simply don’t exist. But, the data above combined do provide a general sense of the norm inside and outside of higher education. It will probably require one of our professional organizations to get pretty serious about establishing some benchmarks before higher ed marketers will have real data on marketing spending by institution type. Any takers?????
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Victoria Badgley said:
Great post – and you are absolutely right that there are few benchmarks for higher ed marketers to reference (although resources/stats around for-profit higher ed marketing are increasingly common). This is exactly why CUnet launched the Annual Benchmarking Report with Leadscouncil. In fact, this year we are planning to do two separate studies, one focused exclusively on not-for-profit, in an effort to help fill that gap. In the meantime, I thought you might be interested to know that last year, over half the respondents to our survey were from non-profits; of those respondents, 29% said they were increasing marketing spending in 2011, 34% reported no change, and 16% reported a decline (21% answered don’t know/not sure). I’d be happy to share the complete report of not-for-profit findings to anyone interested – registration is available here (please check the box indicating your preference for not-for-profit specific results): http://blog.cunet.com/2011surveyreport/.
Elizabeth Scarborough said:
Thanks for the details, Victoria! I’m going to register for a copy right now!
Chris Cook said:
Great compilation of hard-to-pin-down stats! I’m curious how the marketing dollars are distributed between travel, print, TV, radio, social media, other web, etc.). Have you seen any information on that? The next question is what methods are most effective . . .
Tim Ellens said:
I’m kind of late to this post. (Saw it reference in a later post). This information is very helpful in helping me make a case for a larger budget. Can you tell me what a typical Marketing budget includes?
Tricia Dickinson said:
Great overview, thanks!
I think the crux of the matter is referenced within this statement from your post:
“. . . the fact that with the sophistication of higher ed marketing operations, many institutions are simply collecting marketing dollars that were dispersed across the campus into a centralized budget.”
My guess is that there are still many (perhaps larger) campuses where marketing dollars are still spread across campus. That’s certainly the case on my campus, and it would be nearly impossible for me to come up with a marketing dollar figure for this exact reason.
Additionally, as Tim points out, what actually is in a typical marketing budget? Is it just the money spent on “pure” marketing pieces designed with a metric (eg, student recruitment) in mind? Is it the overwhelming amount of resources (including budget) spent on outreach? What about the increasing time devoted to social media, or really any digital communication–there’s often not a dollar cost associated with those other than overhead/time. How do you calculate marketing expenditures from separate entities like athletics or alumni associations? lots of great questions to dig into on this one.
Elizabeth Scarborough said:
That’s the problem with our industry not having a whole lot of data. These “second-layer” questions are unanswerable! We really just don’t have any really strong benchmarks. There IS a bit of breakdown in terms of investment made in print, TV, web, etc. in the LH study. Might help to look there.
In terms of the definition of “marketing budget,” my sense is that this typically includes everything but staff salaries. I know that’s still very general…..sorry!
Gregory Carroll said:
One thing that I find interesting is how we define what a marketing dollar. Over the years when I ask that question I get many different types of answers. Does it mean deliverables only? Does it include advertising, social media development, alumni and university events ), outreach to alumni and the greater university community, the obvious student recruitment milieu , community engagement, travel (virtual or real), and/or professional development. I love it that we are trying to tie this down, and it would be a great benefit to higher education if we could. Can we?