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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?"
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.
...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.
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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.
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.
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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.
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.
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.
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).
All of that stuff certainly racks up serious dollar amounts very quickly. That is one thing I understand from having worked for 10 years before going back to school to become an engineer that most students have no concept of.
I was just making the point that you can't compare engineering expenses to marketing expenses if you don't know the industry. Although I don't think it is really far to call most programming engineering. Most software is not engineered.
Computer modeling for biotech drug manufacturing is HARD!
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.
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.
You guys don't understand business. A company doesn't make money if it doesn't sell. Everything is secondary to selling. If people don't want your product - having a better product that they don't know about doesn't necessarily help. HR is important but it doesn't bring in money. We (the IT staff) are important but we don't bring in the money - the marketing and sales staff do.
A customer knowing that your company exists is important. A customer thinking about your company when they are making a purchase is important. Hence having staff that can find and land customers is important.
Sales & Marketing isn't superfluous it is the heart of business.
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Well, the way I see it, a good engineering department can typically shave 5% - 10% off the cost it takes to make some widget.
A good marketing department can simply convince customers to spend 100% more on the product.
So which might have the higher ROI?