How much should a life science company spend on marketing?

09 February 2018| by Paul Avery

How much should a life science company spend on marketing?

As a marketing agency specialising in the life science sector, we’re often asked how much companies in the industry should be spending on marketing and sales. Although the answer often depends on a number of factors, we’ve done our very best to provide some supporting information in this blog post to help you plan your budget, and ultimately achieve your marketing and sales goals!


How much are life science companies spending on marketing?

The amount of information available in the public domain on this topic varies considerably. At one extreme, there seems to be plenty of data on how much pharmaceutical companies spend on marketing; but less information is available on other verticals within the life science sector.

What’s more, data relating to the pharmaceutical industry isn’t necessarily helpful, as it tends to be atypical (after all, most life science companies wouldn’t expect their marketing budgets to make national news headlines). The audiences that many pharmaceutical companies market to are varied, and often are a cross between B2B and B2C. In the United States, where marketing medicines directly to patients is permitted, you have to consider B2C media spend—such as infomercials (which are notoriously expensive). This is above and beyond what most life science companies would need to plan for.

While there is a lack of accessible information about how much other life science verticals are investing in marketing, the BioStrata team has decades of combined experience working across the breadth of the life science industry. During this time, we’ve observed that marketing budgets can vary considerably. To give you a feel for this variation, we’ve estimated that some companies are probably spending as little as 1% of annual revenue on marketing. At the other end of the spectrum, some companies are spending as much as 10%.


How much should life science companies spend on marketing?

The U.S Small Business Administration publishes a report designed to help businesses make effective decisions around marketing spend. Currently, it suggests that small businesses (defined as firms with less than $5 million in revenue) typically spend 7-8% of revenue on marketing.

In reality, these companies are often competing with larger operations that spend more than this benchmark. For example, businesses with $250–500 million in revenue on average spent 10% of that revenue on marketing (according to this 2016–2017 survey). Meanwhile, businesses with over $5 billion in revenue spent even more—13%. Interestingly, the majority of marketers in both groups stated in this survey that they would be getting even more budget for marketing activities in the coming year.

Perhaps more relevant would be to take B2B companies in isolation, and look at what the wider sector spends. When we look at this data, we see that B2B product companies spend 8.6% of total revenue on marketing, whereas B2B service firms invest 8.7% of revenue.

Overall, these data suggest that a marketing budget of somewhere around 7-13% of revenue is appropriate (although, our experiences in the life sciences suggests that a range of around 5-10% is more common, with companies at the upper end investing more in marketing as a deliberate ploy to drive rapid revenue growth).


Factors that can influence marketing spend in the life science industry

When you set a marketing budget, how do you make the most of it? There are numerous internal and external factors that can influence how you decide to invest. We’ll highlight a few of the key considerations here, as food for thought.

One factor that could influence your marketing spend is a lack of correlation between marketing activity and business goals, meaning marketing may be undervalued. Our first tip is to set yourself SMART goals. If you don’t know what you need to achieve through marketing, you will never be able to determine success against spend. Clearly defined goals will empower you to determine what is and what isn’t working, and help direct you to the best tactics for success.

The next factor that could influence marketing spend is the SMART goals themselves. General awareness-raising campaigns require different levels of investment compared to lead-generation programmes, and both of these approaches differ from activity relating to a new product launch. All three of these examples require the right combination of tactics to guarantee success, but all three require different budgets to achieve this success too! Budgets should be increased when launching a new product and decreased post-launch as consumer familiarity grows. These peaks in spend need to be carefully considered, and our advice is to plan effectively by creating a 12-month content calendar that runs in parallel to your marketing plan.

Regulations and legislation are perhaps not the most exciting of topics for some, but it’s important to keep an eye out for any proposed changes that relate to marketing and communications. New laws around data privacy such as GDPR could require significant updates to your website or CRM—activity that will require budget to remain compliant (even if it's as simple as writing a new privacy policy).

The ever-changing economic environment could also affect marketing budgets. Rising and falling exchange rates could have a significant impact on international marketing efforts, and changing market dynamics will impact spend. For example, a new major publication could start gaining traction in the UK, and you may want to explore paid opportunities with themdeciding that print or online advertising now needs to be added to your marketing mix. With the publication being so new, it will not have been considered as part of your original budget, and with the company being based in the UK you will need to consider current exchange rates against the British pound. The best way to manage this scenario would be to set relevant SMART goals, assess whether the estimated ROI would be worth the initial investment and then transition budget from other activities accordingly.


How does your company compare?

Are you spending enough on marketing? Are you over investing and not getting the results you need?

Regardless of budget, everyone working in the life science industry is facing pressure to make their marketing investment smarter and work harder. It is therefore important to identify and execute a life sciences marketing strategy and tactics that have a proven track record of delivering an effective return on investment.

Not sure how best to balance your budget against your marketing objectives? Get in touch to book a free assessment today.


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