B2B Marketing Budget Best Practices

Highlights

  • The goal of the B2B marketing budget is to find the optimal investment to achieve a target revenue amount.
  • B2B marketing budget best practices share lessons that save time, reduce risk and improve results. They show what actions deliver results and which don't. Tat helps prioritize what to do and can be equally helpful in determining what not to do.
  • For some, the marketing budget is a cost allocation schedule. For others, it's the investment that will generate a net positive revenue return to the company. For all, it's the clearest expression of marketing strategy.
Johnny Grow Revenue Growth Consulting

B2B Marketing Budget Best Practices

There is no one way to create an effective B2B marketing budget. But there are marketing budget best practices that share valuable lessons on what works, what doesn't and how to maximize the investment and show a tangible return. Here are some of those lessons.

  • Start with Company Alignment
    The Marketing Performance Management benchmarking research by Allocadia found that 83 percent of the higher performing marketers "often or always" align their marketing goals to the company's priorities and as a result, get bigger annual budgets. Most of the time the company's top priority is revenue growth driven by new customer acquisitions. However, during turbulent times the priority may shift to double down on growing existing customer share or increasing customer retention. Whatever the top company goal, marketing will maximize its investments and value by keeping in lockstep with what's most important to the company.
  • A Good B2B Marketing Budget Delivers a Revenue Target
    Most marketing budgets are designed as an allocation of expenses. A better approach is to design them as an accumulation of investments to achieve a slated financial goal. The best practice here is to calculate the exact investment amount to achieve a company revenue target.
  • The Right Amount
    Things like your industry, gross margins and growth rate will impact how much investment is reasonable. If you are unsure of the right amount, Gartner advises that, on average, the amount is about 12% of the company revenue.

A CMO survey found that for B2B firms, the average marketing budget was 10 to 11 percent of the company's total budget and 8.7 percent of company revenue.

For B2C companies, the same survey found the average marketing budget was 14 to 16 percent of the company's total budget and 10 to 16 percent of revenue.

The below chart from CMO Survey shows average amounts by industry.

Marketing Budget by Industry
  • B2B Marketing Budget Allocation
    What's included in the marketing budget will also impact the amount and comparison to peers. The chart below illustrates how different companies include different investments.
Marketing Budget Components

For another perspective, an Adobe article advises that the total amount should be distributed as follows: 40-50 percent goes to campaigns and and content, 20-30 percent goes to paid advertising, 10 percent goes to the workforce, 10 percent goes to technology, and the remaining 5 to 10 percent goes to (mostly digital) events.

  • Don't Forget Innovation
    It was the legendary Peter Drucker that said, "because a business’s purpose is to create a customer, it has two and only two functions: marketing and innovation. Marketing and innovation create value, all the rest are costs."
Company Innovation

Marketing and innovation need not be separate. In fact, marketing is in an ideal position to drive product innovation. It captures buyer insights, customer intelligence, Voice of the Customer and market trends. It measures customer demand and manages product launches.

Yet too many marketers sit the sidelines and fail to convert this data for innovation purposes. That's a big missed opportunity. Innovation is a top source of transformation and industry disruption and marketing can drive that transformation if they step up, and allocate for it.

  • Marketing Technology for Automation
    Another wise Peter Drucker quote was, "If you can't measure it, you can't improve it." Technology automation is needed to achieve timely budget measurement. However, Aberdeen reports that 89% of companies use spreadsheets for planning and execution.

A best practice is to use marketing technology to create the budget and then capture costs and roll-up the data for variance reporting. For most companies this will occur in the Marketing Automation Platform (MAP), sometimes called the Marketing Automation System, or the CRM software. MAP and CRM systems can design and publish the budget, record investments, track results in real-time and allow marketers to quickly adjust based on performance.

They can also perform campaign attribution, compare data to prior years, deliver alert notifications, and slice and dice the data for multi-dimensional analysis. This creates insights such as performance by region, campaign, flight, channel and customer type. Without marketing technology it is very difficult to calculate key metrics such as cost per lead or get timely recognition of which campaigns are performing and which are not.

Marketing Reporting
  • Focus on your ICP
    The ideal customer profile (ICP) is a description of the customer that will most benefit from your solution. These high fit customers realize the fastest sales cycles, highest close rates, longest customer retention and highest Customer Lifetime Value (CLV). They are your best advocates and deliver the most referrals. A B2B marketing budget best practice is to focus on your ICP and allocate a disproportionally higher amount of your your limited funds to these accounts.
  • Invest Deep in the Funnel
    Seek out campaign investments that may cost more (i.e., cost per lead) but deliver leads that start deeper in the funnel. I've met many smart CMOs who first invest in leads that begin their journey in the middle of the funnel (MOFU). Then when those sources are exhausted or their cost rises to exceed thresholds they move on to leads that enter higher in the funnel. While the lower stage cost per lead is generally more, the sales cycle is accelerated, the conversions are higher and the cost per customer acquisition is lower.
  • Embed Marketing Costs into Product Development
    New products don't sell themselves. When R&D does not include sufficient go-to-market investments for product launches those releases may get short shrift. Product R&D or product lifecycle management should build in the marketing costs to get new products to market.
  • Reallocate Frequently
    Expert marketers constantly move allocated funds from lower to higher performing campaigns. They test, measure, reallocate and repeat the process. They are quick to abandon poor performers and ready to scale early successes. The more frequent the redistribution the higher the Return on Marketing Investment (ROMI). Novice marketers can be slow to cut their losses. They often fall victim to the sunken cost fallacy, believing that if they keep investing, the effort will eventually pay off. That's naïve thinking.
  • Shift from a Static to Dynamic Reporting
    And finally, the single most important marketing budget best practice is to shift from a static to an interactive budgeting model. Markets shift, customers change behaviors, competitors make inroads and campaigns that worked last quarter don't work anymore. If the B2B marketing budget is designed as a dynamic model, is can respond to changes in real-time. It can adjust in-flight campaigns or implement swift course corrections. It can support predictive modeling to show how a change in investments impacts total revenue. It allows marketing leaders to experiment, perform What-If analysis, run different scenarios, and compare alternatives.

See the B2B marketing budget best practices to excel in high performance marketing investment decisions.

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