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While budgeting out the annual plan, should we allocate more money to product development and the product itself or towards marketing it?

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Question ajoutée par Sidrah Nadeem , Global Marketing Manager , Hill & Knowlton
Date de publication: 2013/04/21

Product development and the marketing process go hand in hand.and the fluidity and flexibility of the interactive dialogue between the two will to large extent determine the success of the product.
Market insights and consumer feedback and needs analysis needs to be fed back to the product teams regularly so they are not developing product in isolation of consumer trends and insights and preferences.
At the same time the features and benefits of the product will be filtered through the narrative of the marketers with the aim of creating an optimal brand experience and emotional connection for the brand.
Some brands will require far greater R&D costs than others and the R&D allocation requirements may vary based on market trends, competitor landscape, disruptions in that particular product space, maturity of product and other factors that would require addressing product specifications and configurations and not just the product's branding and positioning.

Joseph Raheb
par Joseph Raheb , General Manager , Cozmo Entertainment Group

Normally, the two things goes together in pair.
It will be a very strategic professional error to budget the one without the other, the one completes the other.
You can have 100% of budget for R&D or product development, and nothing for the marketing.
Then, the result will be a total flop.
Developing the product is creating an answer to an existing or future need, giving to the products its intrinsic characteristics , while Marketing is completing the product with its personality, the subjective value of it, and deliver it intellectually to the consumer.
So, We need to budget the two together and find a balance between the two.
To which one allocate more, it depends on the company strategy and the type of products itself.
Like in Pharmaceutical labs industry, they need huge budget for R&D, and because of legal context restrictions and regulations in some European countries, Commercials and TV, magazine ads.
are forbidden for medicines.
Voila!

Utilisateur supprimé
par Utilisateur supprimé

It also might depend on what your competitors are offering, if the competitors product are superior than yours, then you need to spend more on product development and enhancing its features.
If your product is competitive but still is facing stiff competition from the competitors, then one need to spend more on aggressive marketing campaign.

Hossam Abbas
par Hossam Abbas , MARKETING SPECIALIST , Aviation Services

Totally depends on business situation analysis, and this decision can be answered easily by Ansoff Matrix which is meant to guide you in this question.
If we are discussing a generic case, I would say investment in marketing have the biggest cut of the budget, until you reach a certain brand awareness and market share level then go to maneuver with the product development.
Note: "By marketing in your question I believe you mean promotion mix"

Tamseel Alvi
par Tamseel Alvi , Segment Marketing Manager , CMPak

Product development is part of the marketing mix so they are inter-related.
But the right formulation of the budget depends more on the category you are working in.
For mature, well established categories, more budget is spent on the marketing process as there is little room in product innovation and even when there is, the incremental benefit is does not reap the required ROI.
Imagine soap where innovative marketing campaigns are used to derive brand preference rather than an intrinsic difference in the functional attributes of the product.
On the other hand consider a dynamic industry like telecom.
Here the real difference comes from product innovation and whoever is able to come up with feature x first will be able to drive preference.
But in general the budgets are higher for marketing the product rather than product development as product development is only one part of the marketing mix while the rest 3 P's individually are also as important.

Yazan Abu Al Rous
par Yazan Abu Al Rous , Business Development Expert , Arab Reporters for Investigative Journalism

Depends on whether you are going for product differentiating then you will have to spend some money on product development, however since it is a retail brand, and there are small area of which your product can be different, then you need to spend the majority on marketing activities to create your brand image and brand management.

Manu Sankar Das
par Manu Sankar Das , Associate Director, Brand Marketing , Redbus

Whatever the context, there is no model budgeting plan that can act as a panacea for cures.
One can never issue a concrete budgeting plan that will be the panacea or cure for every possible scenario.
From your question, I gather that you are looking for a solid allocation between the 4Ps – like 25% for Product, 10% , 30% for promotion etc..
As already mentioned in the other comments, its very difficult to isolate and allocate budget to each of the elements of the marketing mix.
However, since you asked for the same, here is a rough allocation based on what I think is right.
This clearly depends on the extent of your research.
Product => Customer => 40% (includes R&D costs) Price => Customer Cost => 20% (extremely important and should be based on your research on the target audience and includes the market research costs) Place => Convenience => 20% (making the product available to the customer) Promotion => Communications => 20% (marketing costs are usually 10-15% of the revenue or expected revenue in your case and includes costs involved in calculating return on marketing investment) Each of the elements of the marketing mix may have a tolerance level of plus or minus 5% Once again, let me point out that this is purely a hypothetical allocation and not based on exact facts or statistics.
The first rule of marketing is that for a long term growth, the product has to be good.
You cant fool the customers with marketing (maybe a first time, but not for long) if your product isn't good.
So you will have to invest heavily to create a proper product.
If the product is good enough, it becomes a lot easier to market it to create a brand.
Proper ROI techniques will have to be implemented to ensure that your marketing money is spent wisely and even though the marketing costs will be high during the initial phases, it may be reduced based on your reach and the impact of your communication with the target audience.

Renae Richardson
par Renae Richardson , Education Coordinator/Director , Oxford Learning Center

Such has to be answered on a case by case basis and the answer would almost always differ from organization to organization and from project to project.
No one could tell you given the limited information what would be the best trade off.
The key factor as someone else mentioned is ROI (Return on Investment).
You want to know which means of allocating your funds would give you the best return on investment.
The return on investment formula: (Gain from investment - cost from investment)/ cost of investment "In the above formula "gains from investment", refers to the proceeds obtained from selling the investment of interest.
Return on investment is a very popular metric because of its versatility and simplicity.
That is, if an investment does not have a positive ROI, or if there are other opportunities with a higher ROI, then the investment should be not be undertaken." http://www.investopedia.com/terms/r/returnoninvestment.asp

Waqar Shumail
par Waqar Shumail , Marketing & Creative Consultant (Menswear) , Fibonacci

From my time in Menswear so far, I have gleaned2 major learnings:

1.       First, roughly two-third of the yearly spend should be on product development. The product development & marketing spend split should be65/35. Primarily because of the tremendous customer evolution that has taken place over the last decade or so. With the advent of social media, the modern day customer has become a lot more demanding because it is so much easier to stay on top trends & share. This shift demands that a fashion brand constantly keeps on coming new product offering to remain competitive.  

 

2.       Secondly, in terms of fashion industry I believe the bulk of marketing spend (ATL, BTL, OOH, Campaign Executions) should come around key seasonal collections such as Spring/Summer and/or Fall/Winter. Rest of the year the focus should be on social media & occasionally print, to stay on top of mind.

Muhammad Afaq
par Muhammad Afaq , SENIOR FINANCIAL ACCOUNTANT , United Eddy Company (United Yousef M. Naghi Group)

It’s a strategic level decision.
It depends upon the situation prevails that is in which phase of Product Cycle the product is.
If the product is in growth stage, I will allocate more money for its marketing while if it is in mature stage, then more portion of the money will be allocated for development of product.
For example, The Company of Product Lux is now spending more money on product development.
Through innovation (Product development) this company is extending his product life.
If the product is passing through its early stages, need more allocation of funds for advertising.

Farrukh Shahab
par Farrukh Shahab , Category Manager , STC

It depends on the nature of business. If you have less competition, prefer on product and product development. But if you are facing stiff competition in the market then you have to spend more marketing than on product and its development. 

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