Hands down, the two questions we get asked most often are “How much should I be spending on marketing?” and “Where should I spend my marketing dollars?”
These two questions plague nearly every CEO, particularly in B2B, where long sales cycles and multiple touch points with prospects make it difficult to track whether your marketing budget is directly connected to conversions.
The question of how you can get the most bang for your marketing buck is a tough one. In this post, we’ll tackle this daunting topic by answering four critical questions:
This post is a summary of our eBook, CEO Guide to B2B Marketing Budgeting & Planning: Preparing for New Investments. Download the e-book for more in-depth information, as well as example marketing budgets, infographics, case studies, and other related resources.
That depends on whose advice you want to take.
In a recent survey of 300 marketing leaders across the U.S. and the U.K., research firm, Gartner, found that companies are investing 10-13% of revenue back into marketing efforts, across people, tools, and advertising. Smaller companies generally fall on the lower end of the scale, with variability based on scale, innovation spend, and competitive pressures. What’s particularly interesting is that these budget numbers have been climbing for three consecutive years.
In a survey of 349 for-profit top marketers in the U.S., The CMO Survey revealed that marketing spend accounts for 6.4% of company revenues for B2B product companies and 6.8% for B2B service companies.
While we’ve seen the most traction in 10%+ investments, the reality is that it’s not always realistic, especially for companies that have been significantly under spending and can’t justify the massive shift in budgeting practice.
Exact marketing budgets should be determined by a range of factors, including:
Understanding the investment range that’s realistic for your firm along with overall business objectives and expectations from marketing helps set the stage for the types of investments that make sense for your company. Our clients find it helpful to think across three key investment categories: People, Tools, and Advertising.
People: This includes staff and consultants and is inclusive of all investments that require a person to execute, such as marketing strategy development, program management, and content creation. Your “people” budget will depend on company type, environment, and stage of growth.
For example, SaaS companies typically have heavy lead generation, qualification, and nurture requirements. They tend to invest more up front to set up and optimize the infrastructure for digital marketing to generate leads through digital advertising. As a result, budget for staff and consultants is often frontloaded to set up the marketing machine, and it levels off as marketing gains momentum. Services firms and companies that have highly consultative sales functions require thought leadership to set them apart, so their “people” hours stay pretty consistent. It requires constant, dedicated time to become a thought leader through content development, pitching contributed articles, social selling, and network expansion.
As a rule of thumb, this number will likely represent the highest portion of your marketing budget and range anywhere from 50-75% of total spend.
Tools and Technologies: Sales and marketing technologies have become extremely sophisticated, so much so that with investment in the right marketing tools, all digital activities and many offline activities can be tracked and measured to assess whether you’re making the right budget decisions for your business.
The landscape of marketing tools and technologies has exploded and continues to grow across a wide range of categories. The basics include tools that support the infrastructure for marketing and sales efforts—CRMs (Salesforce, HubSpot CRM, etc.) and marketing automation systems (HubSpot, Pardot, Infusionsoft, etc.), as well as the data that fuels program execution, such as sales intelligence platforms like DiscoverOrg and LinkedIn Sales Navigator).
Tools and technologies are steadily climbing in terms of percentage of company budgets. This number may represent 15-25% of your marketing budget.
Advertising and Sponsorship: Additional expenditure should come in the form of advertising, which can mean lots of different things. For professional services and tech companies, we think primarily in terms of digital advertising and selective event or association sponsorships. Digital advertising includes channels like Google AdWords, LinkedIn advertising, retargeting platforms, and performance-based content distribution. Sponsorship can include anything from a booth at a trade show to a paid speaking opportunity to a paid content syndication partnership with a key media outlet.
This category varies widely in level of investment depending on the marketing strategy and associated plan. For many of our clients, it typically represents 10-25% of your total marketing budget.
Within each of the three categories mentioned above, people, tools/technologies, and advertising/sponsorships, there are hundreds of places to spend on marketing, so the challenge is prioritizing what you should be doing of all the things you could be doing.
Making the call on where you should allocate your marketing dollars starts with understanding your objectives. It’s important to think in terms of:
In all likelihood, your marketing dollars will be allocated across all of three of the above areas, but it’s important to prioritize which of them is most important to your business now (as this will likely change over time). For each of those areas, ask yourself:
Some companies shy away from tech investments like marketing automation, even though efficiencies would drive major cost benefits. Others don’t make the investment in paid activity like event sponsorships because of the high-ticket price and unknown impact in terms of leads. Keep an open mind when it comes to figuring out where your marketing dollars should be allotted, and don’t forget the old adage—you must spend money to make money.
Measuring the impact or ROI of marketing programs is easier said than done. Let’s be honest: if it were easy, there would be far fewer blog posts on the topic. Marketing metrics are easy to obtain and readily available, but the ability to tie those to revenue and all of the other business benefits driven by marketing is much harder and more complex.
While many people believe the best (or perhaps most straightforward) way to measure marketing effectiveness is through leads and sales, marketing can be pivotal to other areas of your business as well. Unfortunately, some of the most critical areas are tough to associate directly to metrics.
With that said, it is critically important to know what to expect in terms of ROI:
In any case, you will not see demand gen results overnight. For example, depending on search volumes, PPC (pay per click) advertising generally requires a few months of runway to launch, optimize, and assess effectively. SEO (search engine optimization) typically takes approximately six months to see results and requires ongoing TLC to keep pace. The reality is that ROI for demand gen programs can be slow to realize.
While it’s essential to keep a close eye on metrics whenever possible, it’s equally important to balance that with having faith in the system. For some programs, there will be clear metrics that prove the investment, but for others, you’ll be left wondering how to describe the value of all the incredible work that’s taking place. Have patience and understand that each of these disparate pieces fit together to create a powerful B2B marketing plan.
Wrapping it up
Planning your marketing budget requires time, effort, and input from various stakeholders. Words of advice: be prepared to invest on an ongoing basis – marketing is not a “one and done” activity. In fact, companies that start and stop their marketing efforts are not only wasting valuable dollars, but are also at risk of jeopardizing their reputation; your audience will make their own assumptions about why things have suddenly gotten quiet.
A solid, well thought out marketing budget will set you up for success throughout the year. Develop a budget that takes all of the above factors into consideration, but still leaves room for flexibility in case something unforeseen comes up.
This post is a summary of Magnetude Consulting’s eBook, CEO Guide to B2B Marketing Budgeting & Planning: Preparing for New Investments. Download the e-book for more in-depth information, as well as example marketing budgets, infographics, case studies, and other related resources.