Executives should focus on how to allocate marketing funds rather than how much to spend overall

Ever-rising marketing budgets are becoming an explosive issue. On advertising alone, companies spend fortunes: Nestlé, $11 billion; Unilever, $8 billion; General Motors, $4.7 billion; Procter & Gamble, $3.8 billion; Sony, $3.4 billion; and Coca-Cola, $1.7 billion. ¹ With no end in sight to escalating marketing outlays, many CEOs, CFOs and CMOs are asking two questions: "Is our company spending the right amount on marketing?" and "Are we spending it in the right places and on the right activities?"

In this article, we explore the limitations of current approaches to setting marketing budgets. We then explain a different approach that simplifies the task and gets to the heart of the issue: determining where – not how much – to spend on marketing.