Does the Ehrenberg-Bass Institute have guidance on the % of sales that should be re-invested, as a rule of thumb, to maintain or grow penetration?

The Laws of Growth principles advocate the focus on growing penetration to sustainably grow the brand. Thus activities that is in line with this focus should be the priority for the brand, for example: broad-reaching continuous advertising and ensuring the the advertising and the product packaging build the brand’s distinctive assets.

Whilst other authors suggest that there may be a split of 60:40 ratio for marketing budget (i.e. 60% should be focused on brand-building, and 40% for activation), we don’t have any specific prescription on particular ratios or percentages that brands should follow. However, we do agree that long-term brand building should take priority over short-term gains (e.g., price promotions and other tactics that have no/weaker effects on penetration).

In terms of how much investment should be set for advertising, a study suggests that 10% of the gross profit to be set for advertising budget. This paper can be seen here: A New Theorem for Optimizing the Advertising Budget

A.T.
07 December 2021