How do I Determine the Best Business R&D Spending?

Erin J. Hill
Erin J. Hill
Businessman with a briefcase
Businessman with a briefcase

You can determine the best business R&D spending for your company by determining what your upcoming goals are. If you plan to target a new consumer base, you will want to choose a different strategy than if you are going to reach out to customers who are already buying the type of product or service you have to offer. This difference in potential strategies may greatly effect your overall budget, as well as what areas you put your money into.

If you intend to seek out a new customer base, you will likely need much more research than if you are creating a campaign for current customers. This is true because you probably do not know much about these people and have likely not created a product and marketing campaign targeted directly to them. Your business's R&D spending in this case, then, would primarily go to research of this new audience's likes and dislikes.

You can go about finding this information by holding focus groups, seminars, and taking opinion related surveys. The scope of your R&D spending will depend on how widespread your research needs to go. If you plan to stay within your local area, this will be much less expensive than a worldwide outreach.

For existing customers, plan for your R&D spending budget to go primarily in the creation of new products, as well as the improvement of products you already have introduced into the marketplace. Some surveys and focus panels may still be needed to gain insight on what consumers did and didn't like about your previous offerings, but much of your spending will need to be focused on improving those products and developing new ones to meet emerging demands.

Since there are various aspects to both research and development, the exact places you spend the bulk of your budget will vary depending on the scope of the project and the demand of your existing customer base. R&D spending should be focused on finding out what consumers want and need, and meeting those needs as closely as possible. If you already have a product or type of product you want to market or create, budget these expenses in first. This means the cost of production, distribution, as well as designing if you have not already done so.

Remember that you can tweak and change your budget as needed, so long as the overall amount being spent stays the same. You may also be able to cut back in other departments if your business R&D budget goes over. Research should be thorough and well planned to avoid having to re-do anything. This will help your business save money.

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