Slashdot Mirror
Ask Slashdot: What's Your Company's Marketing-to-Engineering Ratio?
An anonymous reader writes "I just learned that the company I work for annually budgets ~$17,000 for non-labor engineering expenses, but budgets ~$250,000 for non-labor marketing and sales expenses. Am I just being cynical when I say that my company spends almost 15 times as much trying to convince the outside world that we make a good product, than it spends on actually making a good product? What's the marketing-to-engineering ratio at your company?"
Next up: I'm an intern at a company that uses money. Should I keep our financials in notepad or excel?
you would expect a huge difference what are the overall budgets like.
I would think engineering is mostly labor, while marketing involves quite a bit of non-labor expenses. There's your difference.
By excluding labour costs, you've skewed the facts. Engineers themselves are the focus of the engineering department, whereas adverts (a non-labour cost) are the focus of the marketing department.
But then again I do work for a research institute. Your company probably outsources engineering work to us.
...on things other than salary.
Depending on the market you are in, I would very much expect your non-labor expenses in Sales and Marketing to vastly outweigh your engineering non-labor costs.
If I work at a company with 1 marketing guy/gal and 10 engineers, and I spend 1 dollar on marketing non-labor expenses and $0 on engineering non-labor expenses I would be spending an infinite amount of money more on non-marketing expenses but I'd still be clearly focused on engineering.
Loading...
What's the total expenses including labour.
Some sales people need to travel often, engineers tend not to do as much.
Writing software doesn't tend to need as many non-salary-based expenses as marketing that software.
I could go on, but you're an idiot for even raising this question in this manner and with this little in the way of background information.
Typical slashbait.
Marketing and sales have high expenses. They need to buy ads, for starters, and they often need to travel around the globe. In engineering, the bulk of the cost is the engineers themselves (which is excluded from your numbers). In certain industries they might need some expensive equipment, but that gets amortized over several years.
A company I used to work for did business with South American governments. It had a signifcant budget for briefcases full of cash.
Yes you are being cynical. Non-labor engineeringing expenses does not include labor (i.e. developers, Q&A engineered, sales engineers, ect....)
Based on the amount I'll assume That $250k for marketing includes ads across media platforms, trade shows, events, travel fares to/from events, graphic design, giveaways, media consultants, ect...
Depends whether they are they physical or software products? And whether assembly of physical products is outsourced to other companies.
If they are software products, then most of the cost will be in the labor side, not the non-labor side of the budget and without that information, an informed opinion isn't possible.
$17,000 will get you a pair of very decent servers that can host virtualization quite happily for a couple of years. Or one rather cheap CNC machine if you're making physical products.
Marketing on the other hand is expensive. $250,000 won't buy you a TV advert series on mainstream channels. You'll probably squeeze printed media, maybe a booth at a couple of tech events and online advertising out of that.
Trying to become famous by taking photos. Visit my homepage please.
There are very few products that serve needs, so manufacturing the desire for conspicuous consumption is more important than making sure the product works reliably.
You're not being cynical. You're being silly. That $17,000 obviously doesn't include salaries. It is for expenses, which the marketing department will always have more. Advertising costs money. And sales people often have to travel to meet customers. Engineers do what they do without paying for TV spots or traveling to Bumfrack, CA for two days.
If anything, I'd question what the engineering department needs to spend $17,000 on as far as expenses go. Unless this accounts for engineers traveling to customer sites, which should really be on the sales' dime.
Just naive, that's all.
Get a grasp on the concept of marginal costs, and it all might start to make sense to you.
$1 != Infinite amount.
$1 == $1
***SITE_CRACKER***
I see that the 'Marketing-to-Engineering Ratio' at Linux Advocates is equal. Equal to zero, that is.
Actually, you would be spending a dollar more on non-marketing expenses, which is a finite amount.
If your company's salespeople travel as much as my company's do, most of that non-labor marketing budget probably goes to the airlines.
Also, if it's a software development company and IT (the servers and everybody's desktop hardware) and facilities (desks, chairs, etc.) are separate categories from engineering, those figures could be quite reasonable. The main engineering non-labor costs would be for engineering-specific software: compilers, IDEs, whatever.
You're looking at one aspect of the budget. Non-labor expense is usually stuff like paying consulting firms, "cloud services," buying advertisements, paying for training, etc. Capital expense is where you typically book things like servers, enterprise software, storage, etc. So this could be a company who spends a ton of money on marketing crap, or it could just be a company that spends more on external advertising buys and focus studies than it does on sending IT guys to training and outsourcing business apps. Without looking at the total picture it's hard to say what they really invest in.
Engineering Labor is the primary cost of engineering. I need one article to make one CAD model to do all of my design. The exceptions are destructive testing or statistical analysis of a sample size.
Yes there is always the cost of first-article prototypes, but as a whole Engineering cost is WAY more equipment & labor driven than anything else such as consumables.
Contrast that with marketing where labor is almost nothing as a percentage of Advertising costs such a Radio, TV, & Printed Media. Most small business marketing involves the production of large volumes of hand-outs casting a drag net over potential customers and providing them with a unique keepsake that will help them remember you when the need arises.
I can't speak to the appropriate ration because I don't think there is one. It depends on the business, the type of engineering, and it truly is an Apples and Oranges comparison.
The fact that you are asking the question at all suggests that you suspected as much before hand anyway. We've had the unfortunate experience of interacting with marketing driven suppliers and their products are always a disappointment.
Do you really not buy computers, desks, paper, or pens for your engineers? I would say that you don't focus on engineering, you are focusing on torturing engineers. Less so on the markers, since you just have fewer of them around.
Am I just being cynical when I say that my company spends almost 15 times as much trying to convince the outside world that we make a good product, than it spends on actually making a good product?
Short answer, yes you are being needlessly cynical.
Longer answer, don't underestimate how hard it is to sell any product, even a very good one. Further, it isn't a moral issue. Activities cost what they cost. Pick any software company you care to mention and you'll find that their engineering costs are somewhere between 10-20% of total expenses. Most of the rest is the cost of sales and administration with sales and marketing accounting for the lions share of the expense. The reason for that isn't because the sales team is wasting money but because it requires a lot of resources to convince people to buy something. The activities used to sell products frequently don't benefit from economies of scale and like basic research have uncertain paybacks on the investment.
Frankly I think it is a worthwhile exercise for every engineer to spend some time trying to sell their product. Engineers too often are dismissive of sales and marketing and they shouldn't be. A good sales man is an incredibly valuable asset and frequently harder to find than a good engineer. I run a company where we are pretty good on the engineering but until recently were pretty bad at sales. (we're still not great but improving) And the result showed. We make a good product but that isn't enough by itself.
I wa in Psychological Operations in the military, which in a lot of ways is marketing. Now I'm going to school for mechanical engineering. So my sole proprietorship is is heavily both marketing and engineering!
cars, breakfast cereal, video games are all about the same no matter the brand you buy. that's why the amount spent marketing them dwarfs the engineering budgets. iphones and samsung galaxies are pretty close.
basically any product where the competition makes the same thing that is not very different from yours, you have to spend a lot on marketing. investing in engineering in this case is usually a waste of resources since most of your potential customers won't care
If you advertise in almost any medium, TV, radio, internet, newspaper, ect, then that's going to be a "non-labor cost". In other words, besides the salary of the marketing guy, you also have to pay for the advertising, so most of the advertising cost is non-labor. Meanwhile, the engineer costs ought to be mostly be for labor. I'm guessing most of the costs for equipment is going to be covered under IT, but even if you do need to spend a few thousand dollars for hardware and the occasional pizza, it's not going to cost as much as advertising.
Engineers rarely need to travel anywhere, whereas sales people need to be on the road all the time working with and at customers, even in technical (e.g. "sales engineering") roles. Travel is very costly, when I was in sales engineering doing on-site proof of concept deployments, demonstrations, etc... I was easily racking up travel expenses equal to or greater than my annual salary. And this wasn't particularly glamourous travel; customer sites where the technical guys are tend to be out in the middle of nowhere. As a ballpark, that $250K number you cite would be enough to support around 3-10 sales people depending on how on-site intensive your product and sales model is. I presume you know how many engineers you have, so you can compare and decide for yourself.
The ratio of $1 on marketing expenses to 0 engineering expense is infinity. (Or pedantically, the limit of 1 divided by x as x approaches 0 from the positive side increases without bound.)
If your company's making software or selling services based on software, it may be that it's not that sales is high but that engineering's artificially low. Non-labor costs for software development are low. A few thousand dollars for office and computer equipment per engineer (which is a one-time expense, you don't have to buy new equipment when one engineer leaves and you hire another), a few thousand total for printers spread across all engineers... after the first purchases when you start up the annual costs are surprisingly low. Most of the cost will be salary and other labor costs. Sales requires printing of marketing material (which probably has to be farmed out because the specialty equipment isn't something most businesses can justify buying themselves), phone and postage and other costs related to contacting customers, costs of flying salesmen out to talk to customers or negotiate contracts, costs of booths and supplies for trade shows... And it's all recurring costs, spending the money this year doesn't get you out of spending it again next year.
If you're doing primarily in-house engineering, then non-labor engineering costs would be a small percentage of marketing's non-labor costs, because...
Marketing requires the use of outside resources, which inherently involve external labor costs which your company of course sees as non-labor.
Paying for that "hidden" outside labor is going to generally be at least equal to your internal labor costs. To complicate things, your company's external resources may be using yet another external agency (media), so potentially a chain of middle man costs.
In terms of engineering labor vs. overhead, the breakdown is roughly 40% labor, 60% everything else.
In terms of marketing $ spent, it greatly dwarfs the labor rate for any level of engineer, including those who make $200K/yr. Would guess at least ~100:1.
Our CEO makes more than $3 per second, which is over 300 times the salary of an average defense industry worker. Add to that the hierarchy of VPs and presidents across the company drawing seven-figure salaries. Most of them answer to Wall Street rather than the engineers who are indirectly paying their salary by the products they create. Do you feel better now?
Why is this story on slashdot smaller and much less descriptive then an average user comment. cant the editors be bothered to explain terms like 'non labor engineering' in more details. why not at least give details on the the industry the contributer worked in? why should I bother 'discovering' the intent of contributor if they cant be bothered to write a decent paragraph explaining their thought.
In terms of engineering labor vs. overhead, the breakdown is roughly 40% labor, 60% everything else.
In terms of marketing $ spent, it greatly dwarfs the labor rate for any level of engineer, including those who make $200K/yr. Would guess at least ~100:1.
Our CEO makes more than $3 per second, which is over 300 times the salary of an average defense industry worker. Add to that the mind-boggling hierarchy of VPs and presidents across the company drawing seven-figure salaries. Most of them answer to Wall Street rather than the engineers who are indirectly paying their salary by the products they create. Do you feel better now?
This seems to be entirely based on what market you are in. If you are doing software programs in a small company then this seems very reasonable. If you are doing something like pharmaceutical drug creation this would not be even a tiny bit reasonable. Based on the dollar values involved I would guess this is a software company and not actual engineering. Having been a programmer for 10 years and now becoming an engineer there is a huge world of difference.
Most engineering software apps I have run into (process simulation, fluid dynamics, materials etc) cost $10K-$100K per year which would completely wipe out that budget instantly and that is a per engineer cost. Most of these apps also have no free software counterparts. These apps are also updated frequently (as new materials and the simulations for these get entered into the system) so these costs are recurring. This software is hard and expensive to develop and requires actual lab work to create the software simulations.
Computer modeling for biotech drug manufacturing is HARD!
Sure, but you buy a pen for them once every month, a computer once every 2 years, and a desk once every 20 years. That's on average $1000 a year (assuming a pretty damn impressive computer) per engineer. Compare that against the marketing guys, who probably need to fly out to somewhere once every month, possibly internationally, so, account $1000 for flights per month; $1000 for hotels (assuming a week away); a few $2000 conference tickets in the year; a couple of $20,000 booths at conferences; a telephone budget of a few thousand a year.
I don't get why this is unexpected.
I agree this must be the dumbest Ask Slashdot in a while, and that's saying something. What would marketing do with labor costs alone, have them roam the streets as wandering billboards? You need to buy online ads, newspaper ads, magazine ads, tv ads, radio ads, billboards, cinema ads, product placements, banners, flyers, folders and various marketing stunts. Meanwhile software developers mainly need a desk and a computer - which may be considered general overhead since all employees need those - and the rest is small change. In other obvious news, software development companies have more labor costs than manufacturing companies with factories, robots, raw materials and inventory.
Live today, because you never know what tomorrow brings
Don't neglect the cost of advertising, either. Paying for ads is a non-labor expense, and it can easily make or break a product..
In any case, complaining about marketing costs is often silly. An engineering team is basically a tool to convert money into new products. To stay in business, it has to be connected to another group that converts the new products back into money, which means some kind of marketing. You need both sides to pull their weight for the organization to thrive in the long term. As long as the marketing people are doing a good job of bringing in the money and aren't making promises the engineers can't keep, it shouldn't be a big deal to the engineers exactly how they do it.
There's no point in questioning authority if you aren't going to listen to the answers.
I don't know about company (large) numbers, but in a recent project that involves a few engineers, when the company was going to publish a press release, the team size on the email chain has quadrupled overnight.
As others have pointed out, marketing and engineering costs are very domain dependent. And the comparison across industries doesn't tell you much.
Better metric: look at engineering vs legal costs. How much does your company spend to build something correctly vs defend a crappy design later in court. Still, this will be domain specific.
Have gnu, will travel.
When I started working at my company I know the market budget was several times what the engineering budget was, I actually use to get my deadlines given to me by marketing employees. It was during my first software major project when I went to my director and told him this is bullshit, I can't have a marketing guy set a deadline for our product when he has no clue how much work I need to do, the fact was he had under estimated the amount of work "writing a firmware was" by about 10 fold. My director agreed and asked me to sit in on a meeting with the marketing team.
The meeting started off with me asking one question, "Steve ( the head of marketing ), Can you tell me how long it takes to write a full firmware in C for the xxx product", he looked at me and said, "I don't know, I don't program, why would you ask me that!", my response was "Well how about tomorrow you do all the marketing for the new product and have it ready for me, I want it by 5pm", again he looked at me and said, "WTF is wrong with you, I need at least a few months to get that done", my response was, "Oh, I didn't know that, I thought you can do anything in the time set by someone who doesn't know what you do", he sat back and I could tell he was thinking about it and said "Oh wow, I get it, sorry, how long do you actually need?". The next day I got called into the SVP's office and he said, "I heard you caused a shit storm yesterday, well done, because now your incharge of sending deadlines to the marketing team".
My point is that marketing should never out rank engineering and on the same right engineering shouldn't out rank marketing, both sections need to work together and market should NEVER EVER NEVER set deadlines for an engineer. With in the course of the next 6 months my budget got increased and I got to hire some new people to help me. I think a lot of this has to do with the fact business guys just don't understand that engineering isn't sitting down and waving a wond, you need to let the other teams know that you need the right amount of time and that shoe string budgets and impossible deadlines don't work.
In my case I work in a small company so it was easier to deal with but if I ever leave and go to a bigger company I'll have the point to make, if you can't market the product over night then why would I be able to build the system over night, I need to listen to marketing for what there timelines are just they need to listen to me for mine. Under no circumstance should another team tell you when to have work done by, they can ask you to have it completed by such and such a date and invite you to sit in to all the meeting that matter and involve planning, but they shouldn't set your dates or budgets.
What's the ROI for non-labor engineering expenses vs. non-labor marketing and sales expenses? I think you'll find your answer to the budget question here.
My employer seems to spend about $0 on marketing. We make a lot of products, but we don't bother to tell anybody about most of them.
If you have hardware engineers, you don't spend $0 on non-labor expenses. In fact the non-labor expenses will radically dwarf the labor expenses. The tools for some areas can cost as much as a headcount, in others it's a significant fraction of a headcount (and more fun, these are the ones where you need nearly 1:1 license seats/headcount). Then there's jobs you subcontract (backend/layout, custom components, tooling).
And all that is cheap compared to factory NRE & manufacturing costs. I easily spend twice my salary per year in protoype hardware alone. When we go to production, a small run costs more than the entire labor cost of engineering in several years. Hopefully we sell and that money gets earned back of course, but the initial outlay is huge.
Marketing can spend money like nobodies business, even excluding travel. It's amazing how much they spend considering how little it clearly does. But unless you're doing software I would be very surprised if you compared department budgets and Marketing spent more than Engineering (counting MFG as part of engineering, as some companies do).
Sorry, I was not arguing that the expense ratio in TFA was absurd, I was arguing that "assmasher" was not making a coherent point: he simply states that he'd expect more non labor costs in marketing (first complete sentence), and then gives an irrelevant argument (last statement; what I was responding to). You, on the other hand, actually are giving a coherent argument, which was helpful. Thank you.
To be honest, I don't know why I bother arguing with people on the internet with these kinds of names. I should just read their name and decide based on that.
Therefore, they might also be more effective at persuading management that their non-labor costs are needed, than Engineers with limited sales skills persuading management that their costs are needed; because the marketing people are more experienced and skilled at this art of persuasion, it is natural that, there could tend to be a bias....
Maybe engineers need to learn more marketing skills, if they think non-labor costs that would help their department be more productive, are being underfunded, BUT on the flip side -- expect more marketing responsibilities to come with that.
Have you ever found something, particularly something released years ago, and said "How the hell did I never hear of this?" Well that right there is a failure of marketing. There was something you would have been interested in, but you didn't know that it was out there for you to buy. Things don't just magically spread word-of-mouth. Sometimes it happens, you get lucky and your item is real popular to talk about and everyone spreads it around. However more often, you have to go and make it known.
Also this Ask Slashdot is particularly stupid because he says "non-labour" when talking about expenses. So he means excluding all salaries. You know, the really big expenses. That is the really telling part of how much you spend on something. Salaries will almost always be by far the largest item.
For example I work for a university IT group for an engineering college. We have an annual capital budget, meaning money for computers, switches, that kind of thing of around $100,000. We have an annual salary budget of about $1,000,000. We spend literally around 10x on people as we do on things. It is also fairly expensive when it comes to things since computers need relatively frequent replacement, you usually only get 5-7 years out of them.
That also doesn't pay for a ton of people. That is maybe 9 staff and 10-15 of students.
People are expensive, at least if you want good people and you want to pay them a fair wage. $10,000 gets you a pretty nice Dell server that you can stack a ton of VMs on and it'll last you for a number of years. $10,000 also pays a fraction of one person's salary for a single year. Easy to see why things get stacked in the people direction.
Also more people, more labour, is usually what you need to make something better, to have better service. I mean thinks if you are writing a program, what helps more: An additional server, or an additional coder? I'm not saying the capital equipment is unnecessary, but the expense will be way less.
Posting anonymous just in case, but at my company a major US internet provide). We spend roughly 400 million in my department each year (Fortune 500 company) and 250 mil on marketing. I do high end network architecture supporting around 6 million users.
Very annoying that a bunch of computer programmers are posting here who know nothing about engineering!
Prove anything by multiplying Huge Number times Tiny Number
Well technically if you have marketing but no engineering then your ratio is infinite because you are dividing by zero.
Careful with names containing L slashdot.org/~AiphaWolf_HK slashdot.org/~AlphaWoif_HK slashdot.org/~AiphaWoif_HK
By all means, build a better mousetrap, but rest assured this act alone will not get the world 'beating a path to your door'. You must inform the audience - to do this, you need marketing. Until we humans evolve full telepathy, this is your only hope to make sales figures that are viable.
Get over it.
So then it follows that they have no marketers and an unknown but non-zero number of engineers?
Bio questions? Ask me to start a Q&A journal. Computer analogies available for most topics!
The discussion is related to the phenomenon experienced by new consultants. After a successful technical career, someone launches his or her own consulting business and very soon comes to realize that 90% of the job is marketing. You might be the best tech person around but without contracts / engagements, you starve.
Build a better mousetrap and the world will beat a path to your door. A saying from when productivity actually meant producing things of value.
The reasons so many companies spend obscene amounts on adverstising/sales/marketing are either because their product is not really needed or desired by the consumer, or because their product is essentially a commodity.
In both cases the vast majority of the marketing/sales is simply lying and manipulation.
Look up Bill Hicks quote.
93.2% of their staff are sales and media lackies (according to their reports). Techs are a long way down on staff costs. If you are making a product, you need an army of people to push and push and push it. You only need a small team to actually build things, especially when physical products are made by near peasants in China and India. If your devs outnumber your sales, you're niche and won't make much money.
I guess it wouldn't bother me so much if the sales people weren't so.... detestable.
Well technically if you have marketing but no engineering then your ratio is infinite because you are dividing by zero.
That's the most efficient business model. Companies like HP for example are laying off or selling their research and development teams focusing on the spam and telemarketing. Senior management collects their bonus for making the company more effective. When perfected, you're left with an imaginary company.
Much engineering falls under capital expense, not cost of goods, so it may well be showing up in a different location. Also, I turned from engineer/scientist (Phd in CS) to entrepreneur when I realized a basic fact of life: you either bring in the money or you work for someone who does. As they used to say: Don't like the news? Get out and make some of your own! cheers
Sales brings in the money, Marketing spends it.
Technically, that ratio is undefined, not infinity.
Engineers rarely need to travel anywhere, whereas sales people need to be on the road all the time working with and at customers, even in technical (e.g. "sales engineering") roles.
Travel is just a piece of it and frequently not the biggest line item. Salaries are usually near the top, especially if the sales people are paid on commission. If you bring marketing into the mix, advertising can be a huge line item on the income statement, especially for a retail business. You also have to consider items like promotions, stocking fees, and similar.
As a ballpark, that $250K number you cite would be enough to support around 3-10 sales people depending on how on-site intensive your product and sales model is
$250K would not support 10 sales people. It probably wouldn't even support 3.
How do people decide between two cars (for example) that are pretty identical in paper? MARKETING. Just being great isn't nearly enough.
Depends on where you work. Not everywhere assigns every pen to a specific department, but instead has an office management department that covers all consumables, and IT covers all IT infrastructure (including desk PCs and servers).
Learn to love Alaska
That's labor included.. non-labor is hard to figure and industry dependent. If you're a purchaser of advertising, that's non-labor. If you use inside or outside sales, that's more like labor costs.
Modded this -1 overrated because I -1 disagree with your -1 mathematically uneducated statement.
Dividing by zero doesn't give infinity.
Marketing/sales probably has a heck of a lot of travel expense, food and other entertaining expenses, long distance charges, cost of posting ads etc. Also do they count bonuses/prizes as part of labor costs or does this come out of a general pull of cash? Sales always amuses me they are more incentivized for results but at the same time it seems like a lot of time the incentives are for doing what they are paid for anyways (example answer a phone and take an order without any need for a sales attempt still get commission).
In a manufacturing business, engineering will often have direct expenses like one-off charges for trial materials, and esoteric accounting items like built-in down time costs, amortized efficiency, etc. that can be considerable but never approach the necessary travel, printing, and ad-buy costs the marketing weasels must budget for.
OTOH, engineering gets next to nothing in indirect expenses like printer cartridges or the occasional professional class/seminar, but marketers are usually treated like golden children of the gods, and they get opulent offices, extravagant "team-building" and "sales-force development" group vacations, and the latest and greatest of everything.
Is thinly-veiled jealousy or bitterness on the part of engineers justified by this? In a capitalist economy, no. It's just the way it works.
The payback for me, personally, is the satisfaction of retaining a shard of self-respect and integrity. I will never be lumped together with salesmen, lawyers, politicians, clerics, and the other professional sociopaths.
Scruting the inscrutable for over 50 years.
Short answer: Yes.
Long answer: Yes, you are.
I'm generalising hugely here, but as a profession, most IT people (whether it's in software engineering, systems administration or management) can be extremely dismissive of sales and marketing.
This is a huge mistake.
If you're selling a commodity (a commodity is something where the product from one company is much the same as the same product from another company - gold, copper, coal and bananas would be examples of commodity items) - you've got to persuade people that it's somehow worth buying from you rather than any of the other people selling essentially the same damn thing. And commodities tend to have very slim profit margins because as soon as you find a way to knock £0.02 off your costs and pass that saving onto your customers, your competitors do the same thing. There is a damn good reason that every major supermarket has an enormous advertising budget, and it ain't because they like throwing money at newspapers and television stations.
If you're selling something that isn't a commodity and never will be - there's lots of business mentor-type folk who wouldn't get out of bed for less than £1000 per day, even out in the sticks - you need to persuade customers that you really are worth £1000 per day. If your customers get the remotest inkling of an idea that you're not worth that sort of money, you'll be out of a job very quickly indeed.
Then you have things that aren't really a commodity, but your customers think they are. A hell of a lot of technology falls into this category. You're trying to persuade your customer they should be buying software that lets them do X, Y and Z - but they've seen a boxed product in their local branch of PC World that claims to do the exact same thing for a tenth the price. If you can come up with a quick, easy way to resolve this that doesn't involve learning an awful lot of sales theory that doesn't always work - there is an entire industry that will happily write out 6-figure cheques to you.
your ratio is infinite because you are dividing by zero.
It's undefined. Otherwise, if 3/0 = infinity then you're saying infinity times 0 equals 3.
Because nomen might not always be omen, you insensitive clod!
CLI paste? paste.pr0.tips!
Am I just being cynical when I say that my company spends almost 15 times as much trying to convince the outside world that we make a good product, than it spends on actually making a good product?
You're not being cynical, you're just missing an important piece of the picture. Others have already pointed out that marketing requires ongoing expenditure while engineering and R&D are usually lump sum startup costs and only further invest in new equipment / licenses as needed. However there's something more fundamental to your statement.
If you spend all your time making a good product how will people know? This isn't a case on gutting engineering and making up for it in marketing, the two go hand in hand. You could have the best product in the world and few people will buy it because they simply don't know about it. Sure there are options such as word-of-mouth etc, but marketing gives word-of-mouth some teeth. Having a continuously monitored and updated presence on Facebook or Twitter does not come for free. Marketing will help spread the word there.
Also you may be underestimating the cost of marketing to begin with. $17000 can get you some engineering gear that will keep you going for a year. Few computers, licences, maybe some very basic measuring equipment. $17000 will be lucky to get you an advert is a magazine. For a practical example, your $250000 will buy you exactly 1.87 seconds of airtime during the Superbowl.
Marketing is expensive.
There's been research on the issue of advertising and marketing. On one hand advertising facilitates better matching (consumers learn about products that they want to buy). On the other hand, this is money spent that doesn't produce anything. For example, Coke and Pepsi's advertising budgets are huge, and it's hard to argue that these ads help consumers.
There have been papers investigating the welfare effects of matching and competition (matching is good, competition in advertising is bad). The current literature (and I can't find the citation) agrees advertising is bad in total, as the useless competition outweighs the better matching, but it's not obvious and it's not an overwhelming effect.
It may NOT be the case at your company, but over the years I've seen total stupidity at many companies with regards to engineering budgets or lack thereof.
Consider an engineer - let's say that hypothetical engineer is paid $100K a year. They talk to their manager - and say 'Hey I if I could spend $20K I could quadruple the number of build,test,debug cycles I get done in a day - they currently take 5 hours on average. 4 hours of that is building and running the test suite.
Many managers would say 'You're out of your damn mind! - $20K that's a car!'. They are, of course, killing the company. Even if that engineer is out by a factor of two, and they can only double the number of cycles they get done in a day - you just basically turned down buying another 'magical engineer' who somehow instantly knew the problem-space, knew the details of the environment, and was instantly efficient for $20K.
The managers are ALSO forgetting is that many studies have shown that ruthlessly limiting the number of people working on a project is one way to improve chances of success. This was directly shown in spades to IBM when Control Data built the 6600 - the total CDC team was 34 people including the janitor.
A wise manager would say - 'Let's talk this through', and check the engineers thinking. Maybe ask another engineer. If it looks good then go for it. Even if it lets the engineer turn those 5 hour cycles into 4 hour cycles - it's paid for itself.
... just to be HEARD!
If your company does business with the federal government, then FAR might be skewing the numbers.
Direct expenses, including non-recurring material costs, can be billed direct (i.e., to the contract) whereas marketing costs are by definition indirect (cannot be billed to contracts but do count towards overhead, G&A, etc.).
This means that a lot of "non-labor engineering expenses" could be hidden from that ratio due to the fact that they're billed to the customers.
I can see the fnords!
It depends entirely on the nature of your business If your business primarily reselling an existing product or making modest customizations of an existing product then most of your costs will be related to marketing and sales. Apple for it's size spends comparatively little on R&D, but a lot on marketing and sales. If you're business is at the cutting edge of technology constantly pushing new boundaries then you would expect a lot more in R&D and less in marketing. Intel for example spends quite a lot on R&D for it's size. It's like asking what's the right size of building for a company
The horrible horrible truth is that if you have an awesome product and no marketing you will have no money. If you have little to no product and awesome marketing you will have piles of money (think con artists). That said, the world is a better place with more awesome products and fewer con artists. I have always thought that there should be a limit to how much marketing is tax deductible as a huge number of companies make terrible products such as junky fizzy sugar water or fast food and are able to run circles around products that are vastly superior. As a bonus R&D spending should (and in some places does) have tax benefits such as every R&D dollar would give you 1.2 tax deductible dollars.
In my area there are ways to get government grants for product development. They are loth to give R&D money but will pile it on for marketing. So they end up funding scam after scam after scam. These are companies that cobble together a prototype of some technology made up from the latest buzzwords. I am willing to bet that they are now funding: A strategic coupling of graphene based mobile with cloud infrastructure that enables a low carbon 3D printing of big data.
selling X at price Y to someone who needs X and is willing to spend price Y...that's **as easy as falling off a log**
It is hard. But you didn't hit why. People LOVE buying things. It is competing **independently** in a gamed-out large corporate dominated environment.
Take an Asian market (mine is in Korea b/c i lived there for a year)...so much commerce happens in Asian open-air style markets. Billions of transactions. Virtually **zero** marketing...why? It isn't necessary because humans naturally exchange resources. It's part of our social/tribal nature evolved into fiat currency.
And humans will always need resources. Marx's theories are instructive here.
No, it is hard b/c our government sets the rules of the game, and the big players have games out every possible avenue of decision control and applied their MBA project management bullshit to it...it's done. Now we watch it play out and hit the margins where we can.
2. A second (some might say the more salient) reason why marketing budgets are so huge is American business philosophy is dumb and run like a casino. The going idea is 'perception is reality.'
If they can make you think you're getting a quality product, what does it matter if they cut corners? Sure this is good sense to a point, but as I said above, it has been gamed-out to the Nth degree and human needs are (as shown by history) typically secondary to short-term profit.
America (and by default the global economy) is a hucksters game...people shilling cheap junk. Business doesn't *have* to be this way, but government must provide incentives in the direction of long-term investment and consumers must have a free press to educate them.
Thank you Dave Raggett
Oh; marketing does a lot, when you consider that the marketing departments FIRST job is selling management on the idea that they need a marketing department. Thier second job is proving to management that they are worth the expenditures already made. Actually selling units/services to the customers is third, maybe job 2b if compensation is properly and closely tied to actual sales. Although; if sales are actually poor, a slick marketing team can easily pass the buck (it's a crappy product, it's a saturated market etc) and use *that* to justify even *more* money.
1/x... what happens as x approaches 0... ??
I think you're more naive than cynical.
First, the ratio will be heavily dependent on the type of company. A semiconductor company doing leading edge chips may spend well over $10 million to fab, package and test the first batch (including things like NRE charges.) In contrast, software is easily reproduced, so the non-labor engineering will be less.
Second, the ratio of R&D and marketing-sales expenses ranges over a very wide range depending on company type (chips, hardware, licensed software, SAAS, services, ...) and their strategy within that business area. It is not unusual to see software companies that license software for use by customers on premises to spend 10-20% of every sales dollar on R&D and 40% to 60% on sales and marketing. While it may seem disproportionate to you, it may actually represent the optimum allocation of resources in the sense that it provides the best return to shareholders (which may include employees). Given that certain products already exist, it can often provide better returns to spend more promoting those products to boost sales, then spending an equivalent amount on developing new products.
Most technology companies are in fairly competitive businesses (both against similar types of products and substitute products). There is accordingly a natural pressure for companies to gravitate towards the optimal ratio between engineering and marketing-sales, so as to maximize their returns. Maximizing returns allows the fastest possible growth, and hence expansion of both engineering and sales-marketing expenditures. Companies that fall off this optimal point are likely to fall behind in market share and product development, and can potentially fail.
The other way to change the balance is through innovative business models that have different optimal points - hence the difference between the allocations for on-premises and SAAS software businesses.
Compare your company's ratios to those of other companies in similar lines of business. If your company's ratios are substantially different from those of the most successful comparable companies, and your company doesn't have a valid explanation for the difference (i.e. isn't able to clearly articulate why their strategy is different and the benefits expected), then your concern could be valid. But if your company matches the comps for its business model, just because there is a big difference in non-labor engineering and M&S does not mean there is a problem.
"Real" engineering or software? For some, there's no difference.
fx=1/x. As x approaches 0 fx approaches infinity. That does not mean that 1/0 = infinity. It doesn't make sense which is why it's undefined. If 1/0 = infinity then infinity times zero equals 1. But that can't be true if 3/0 is also infinity. Then infinity times 0 would equal 3. There's a reason divide by zero is undefined and not infinity.
If you spend all your time making a good product how will people know?
And more importantly, how do you know you are making a good product?
Companies with great technology and even great sales teams can fail simply because people don't actually want the product. A key role of Marketing is to find out what products will actually sell rather than what products can be created.
The best parts of my career have been those "light bulb" moments when the Engineers talk to Marketing and realise that they already have the technology they need to make the "killer product" that the market wants. The worst parts are when Engineers insist on creating great technology rather than great products, or when Marketing fails to take a realistic view on what will actually sell (often because the Marketing people have clung too tightly to their engineering roots and think that everybody wants to buy great technology)
This is the Light Side of Marketing: Finding what is right for customers, working with Engineering to create it and then explaining the benefits to customers is a clear and accurate way. A good company will invest a significant amount of money on this kind of Marketing.
I think we all know about the Dark Side of Marketing...
Even a company with a great product/service faces the challenge that it's tough to convince people that your product/service really is great. There's just so much noise in the market. A company with a great product/service can easily die just because the guy across the street sold a crappier thing but used a pro athlete's face to get people's attention.
More than that, people want to go out and sell their product/service as soon as it actually is better than competitors. They don't just want to sit in the lab infinitely tinkering with improvements. So, when you get it "good enough" to make some people happy, the sane thing to do is throw your energy and your money into marketing and start trying to hawk it to anyone who might buy. And you keep hawking it until you stop getting more customers than it costs to find them. When that inevitably happens, you put more emphasis back on engineering and figure out what the next thing is. You obviously can't ignore R&D, but it's literally irrational to believe that a profit-seeking business should de-emphasize selling.
Hmmm... good point. Suspect it has more to do with semantics of infinity. Infinity never behaves in a rational manner *duck*...
Marketers or Engineers?
So who is more likely to sell their services all things being equal?
There you go.
A lot of the problem is that engineers suck at selling themselves. Same thing with most technical professionals. They don't know how to work with customers and they don't know how to work with management.
Marketers are great at dealing with both customers and management. They manage their relationships and make sure everyone appreciates everything they do even if they didn't actually do it.
If engineers worried a bit more about this stuff they'd have an easier time. And before you say that's unreasonable, consider all the politicking that goes on in academia, the fund raising in politics, the legal nonsense in medicine. Everyone has different things to worry about in their professions besides their actual job.
Make some sort of effort to market yourself or your department. Sell yourself to management. Remind them what you do now and tell them what you could do with more money.
Beyond that, something that marketers are very keen on is commissions. They say "look, for every extra account I bring in you give me X dollars in bonus pay"... management is frequently alright with that idea because if you bring in the account they're covered and if you don't its no skin off their back.
Do the same thing as an engineer. Propose a project. And say "when this is done and it works as advertised, I get a bonus"... put your own time into it.
My point is this... management might not appreciate you but that isn't the marketer's fault. They're doing their jobs. Engineers should emulate them a bit and not assume that they're allowed to sit in their ivory tower.
I've decided to stop wasting my time responding to AC trolls/sockpuppets... so if you want a response from me... login.
Where I work, there are more than 20 people involved in Sales & Marketing, where as I AM the Engineering dept. My situation is somewhat unique due to a major internal restructuring which is in the process of taking place and until that is complete I will be by my lonesome. That being said, it often boils down to what kind of business you run and what the senior management feels is most required. My company is a bit out of whack in my opinion but such is life.
Actually, I would kill for $17K annually for Engineering expenses.
Take an Asian market (mine is in Korea b/c i lived there for a year)...so much commerce happens in Asian open-air style markets. Billions of transactions. Virtually **zero** marketing...why?
If you think there is no marketing occurring in those markets you are very confused about what marketing is. Most of the products you buy in a local market like the one you describe (I've been to plenty of them in China and Southeast Asia) sell branded products or knockoffs of same. A lot of marketing has already been done by the big companies that produce the product. Brands matter for a lot of reasons. More is done by the shop owner when they try to make their products attractive to customers. The shop owner has to spend valuable time at the market to sell their wares by building a relationship with potential customers. That is hard and expensive and time consuming. There is a TON of marketing going on even if you aren't really aware of it.
You seem to be under the illusion that only big companies do marketing. Further you seem to be confusing marketing with sales. Marketing is the act of creating awareness of who you are and what you are selling and why they should buy it from you. Sales is the art of negotiating the details of the transaction. Both are necessary parts of the equation. Most products can be bought from more than one vendor and most products have substitute products they have to compete with. Why should they buy yours instead of the other guy's? What benefits does what you are selling have compared with the price you are requesting? How does the customer become aware of the existence of you, your product and why they might consider buying it from you? These are not trivial questions with trivial answers.
And humans will always need resources. Marx's theories are instructive here.
Really? You're going to cite Marx as a source of economic theory? You need to spend some time trying to actually sell something to real customers. You're not going to find anyone who has tried to actually run a business or sell a product to actual people spouting Marx as being instructive of anything.
You can't sell a great product without great marketing;
if you have great marketing, you don't need a great product.
Products don't sell themselves. Companies that aren't aggressive with getting their message out/marketing and paying top dollars to good salespeople are called bankrupt.
If you approach from +1 it goes to ainf, but if you approach from -1 it goes to -Inf, hence undef.
no...unless 'squid' or 'apple' is a brand...and the clothes...they weren't 'brands' either
you're one of the people that's ruining American business with your lack of understanding. Your error is you label any human communication 'marketing'. Human behavior is much more complex and cannot be predicted by 'marketing' tactics.
Yes, things that have alot of marketing sometime sell alot, and sometimes they bomb. Yes, if you **hit the customer over the head** until they have an Aneurism, yeah...by the law of averages, you might make your margins...especially if you can limit their choices in alternatives. This is **NOT** business thinking...this is exploitation. You're an idiot if you don't see the difference.
Your problem is caused by a mixture of unearned hubris and ignorance. you have no concept of how money is made. you're a perpetual employee...underling employee
get me a cup of
Thank you Dave Raggett
The question posted by someone who apparently don't understand accounting. Engineering for products is part of Cost of Goods. Marketing for product may or may not be Cost of Goods and is often overhead under GS&A for any mature product. This because you tend to do specific marketing in the front-end of product development and release rather than when it's mature.
Of course, all of IT is GS&A overhead as well - it's not product specific. So if you are measuring engineering by any IT content, that is "a different color/bucket of money" that can't be compared to product engineering.
These categories actually make a world of sense however because the intent is to make any cost that can be attributed to a product or activity accounting actually attached to a product the creates the cost. This is the only and best way to assure fiscal and operational responsibility because it creates a check that balances possible abuse or error.
So if you want to realistically compare engineering-vs-marketing, you have to consider a number of things:
* Are you matching the type of engineering vs. marketing by cost activity: is it GS&A or is it specifically tied to a particular product. Is the product a new innovative product or a mature product (in terms of technology adoption). Your position is the company often reflects this accounting difference.
* This ratio depends on what type of company you are in - all companies are at various levels of maturity (as a corporate lifespan) and as a formational objective (why they were formed and what market they are targeting). These are often related.
* Products and their markets also have a lifespan. This is what Jobs was talking about with Post-PC. PCs are in very late adoption. They are a commodity as ALL LATE ADOPTION PRODUCT TECHNOLOGIES always are. In late adoption, most costs are focused on marketing and sales, not engineering except in terms of minimizing all costs. Engineering itself included in the cost minimization exercise.
The BIG factor here is if you think too much is spent on marketing vs. engineer YOU MAY HAVE MADE A MISTAKE in understanding what kind of company, what kind of product sold, and what kind of position you took the job for. If you work in IT for a mature company that focuses on mature products that haven't innovated much in 10-20 years, you simply should NEVER expect high spending on engineering compared to marketing. Basically you signed up for a laggard company that will never be about being primary engineering or innovation. YOUR MISTAKE. YOUR DELUSION. In contrast if you work for a start-up in product engineering selling an early adoption product, company will spend most of its budget on engineering rather than marketing.
If the company you worked for was a US company, it sounds like they were in clear violation of the FCPA (Foreign Corrupt Practices Act). US companies are barred from bribing foreign officials. I'm surprised to hear that such illegal acts would be included in the budget. Or perhaps were you working for a non-US firm in a country that does not have a similar law?
This sig is false.