The most important and difficult decisions that marketing leaders must make inevitably involve the allocation of marketing resources (money, people, time, etc.).
Regardless of company size, the resources available for marketing are rarely sufficient to enable marketing leaders to do everything they’d like to do. Therefore, resource allocation is an intrinsic part of every significant marketing decision, and the challenge for marketing leaders is to use their finite resources for programs and capabilities that will produce maximum results.
Deciding where and how to invest limited marketing resources has never been simple or easy, but these decisions have become more complex and challenging because today’s marketing leaders have more options than ever before. Over the past several years, the number of marketing channels and techniques has grown dramatically, and the explosive proliferation of marketing technologies has been well documented.
Marketing investment decisions are further complicated by the need to maximize performance in the present, while simultaneously laying the foundation for success in the future. Because customer expectations and preferences are constantly evolving, marketing techniques that are highly effective today may become less effective in the future, while marketing techniques and capabilities that aren’t very important today may become key to future marketing success.
Fortunately, there’s a good rule of thumb called the 70-20-10 rule that marketers can use to address this particular aspect of the resource allocation challenge. The 70-20-10 rule is used for a variety of business purposes. Many companies, including Google, use it to manage innovation resources. Coca Cola has reportedly used a version of the rule for years to guide marketing investment decisions. Here’s how the rule works.
The 70%
The marketing version of the 70-20-10 rule states that about 70% of your marketing budget should be spent on capabilities and programs with a well-established track record of acceptable performance. These will include marketing channels, techniques, and technologies that your company is currently using successfully.
The 70-20-10 rule does not mean that companies should simply “keep doing what we’re already doing.” It means that marketers should evaluate how well their “bread and butter” programs are performing and continue to invest in those that are delivering acceptable results.
Your primary goal with these capabilities and programs is to drive incremental performance improvements.
The 20%
According to the 70-20-10 rule, about 20% of your marketing budget should be invested in “new,” but promising capabilities and techniques. This category will typically include channels and techniques that a growing number of other companies are using successfully. In many cases, these channels and techniques will be approaching mainstream adoption.
Investments in this category are not quite as safe as those in the 70% group, but they often relate to capabilities or technologies that will become critical to your success in the near-term future.
The 10%
The remaining 10% of your marketing budget should be invested in truly new capabilities and techniques that have just emerged on the scene. Obviously, these are high-risk investments that aren’t likely to produce short-term benefits.
For small and mid-size companies, the investments in this category may consist primarily of learning about the new techniques of capabilities – e.g. sending members of the marketing team to conferences or other educational events. Larger companies may also decide to launch small pilot projects to experiment with a new capability or technique.
Caveats
As with other rules of thumb, marketers should view the 70-20-10 rule as a guide rather than a precise prescription. The specific percentages in the rule may not be appropriate for every business in every competitive situation. The benefit of the rule is that it leads marketers to give appropriate consideration to both current and future needs.
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