Do staffing companies spend enough on marketing?
Staffing is a “me too” industry. Staffing companies generally provide the same types of services to the same group of customers – and, in many instances are even supplying the same temporary workers (as many temps register at more than one agency). The only tangible points of differentiation between one staffing company and another are the people they employ and their brands. Staffing Industry Analysts’ own research shows that customers often have difficulty discerning the difference between staffing suppliers – and, where they can’t discern a difference, their purchasing decisions will be based on price above any other criteria. For this reason, you would imagine that staffing companies would devote considerable physical, intellectual and financial resources to marketing – that they would be creative pioneers at the very cutting edge of marketing innovation. Sadly, almost the opposite seems to be the case.
Marketing practitioners advise that, as a general guideline, 8% to 10% of revenue should be spent on marketing, however, the appropriate percentage will be determined by a number of factors such as how mature your market is (how much education you have to do?), how well known your company is in your industry (are you a new or established business, how much brand awareness you have to do?), and how fast you intend to grow. However, according to a 2010 CMO Council report, 58% of marketing budgets fall below the 4% of revenue mark, 16% of companies spend between 5-6% of revenue, 23% spend over 6% and a rare 2% of companies are spending at the 20% and above mark. Linkedin is an example of a company at this extreme end of the spectrum with a colossal 24.3% of revenue spent on advertising in 2010.
The percentage varies across industry sectors and depending on whether the company provides a product or a service. IDC published data in 2008 indicating that, across surveyed IT companies, the following ratios determined marketing spend as a percentage of revenue - hardware providers: 2.8%, IT services providers: 0.8%, and software providers: 5.1%.
The retail sector provides other examples. Wal-Mart only spends 0.4% of revenue on advertising, however, the sheer size of the company turns that tiny percentage into quite a significant budget. Wal-Mart's nominally higher-margin competitor in the US, Target, spends closer to 2% of its revenue on advertising, while Best Buy, as a specialty retailer, spends upwards of 3%. More upscale retail stores like Macy's typically spend in the order of 5%.
Automotive manufacturers generally spend between 2.5% to 3.5% of revenue on marketing while drinks manufacturers are in the 5.5% to 7.5% range.
So how much do staffing companies spend? Unfortunately, there’s no exhaustive data available on this topic as companies are not required to disclose the number, and even publicly listed companies can get away with burying marketing cost in the broader ‘SG&A’ category. However, thankfully the world’s largest staffing companies are not quite so circumspect. So we know that Adecco spent 0.4% of 2010 revenue on marketing and that Randstad spent 0.8% (probably higher than Adecco because they are undergoing an extensive exercise to rebrand/consolidate the numerous brands they inherited via Vedior). Manpower (interestingly, the only major staffing company where the CEO is an ex-VP of Marketing) disclose ‘advertising costs’ which were 0.2% of revenue in 2009 and 2010, having been reduced from 0.3% of revenue in 2008. Obviously, given the scale of these particular staffing giants their marketing budgets in actual terms rather than as a percentage of revenue are beyond the wildest dreams of most staffing companies. Nevertheless, the percentages are still some way below what is generally perceived as being best practice.
Given the uncertain state of most economies in 2012, it is difficult to imagine many marketing managers winning the argument to increase marketing spend next year (although you’re welcome to point your colleagues to this blog if you want!). But clearly, the staffing industry still has plenty of room for companies who want to make the effort to stand out from the crowd, to establish themselves as thought leaders, to be regarded as quality service providers. Marketing may be only one of the ways by which this can be achieved, but it’s an important component that most staffing companies seem to underrate.
Finally, in a blog about marketing, it would be very remiss of me not to mention the many fine ways available to promote your brand via Staffing Industry Analysts’ high quality roster of conferences, webinars, online media and magazines targeting North American and European markets! For further information, contact firstname.lastname@example.org