How Much Should B2B Companies Budget For Marketing?
While budgeting can feel tedious and confusing, it’s a vital part of effectively running a business. As you sit in front of your computer, an empty Excel spreadsheet filling your screen; it’s understandable to want to throw any old number into the “Marketing” bucket. But, resist that urge.
This blog will explore how much B2B companies should be investing in their marketing and will hopefully help you to produce a far more effective forecast of marketing spending in the upcoming year.
What are other companies spending?
To determine how much B2B companies should be spending, we’ll first take a look at what they’ve historically spent on marketing.
According to the August 2018 CMO Survey, companies spend roughly 10.8% of the overall firm budget which ends up being about 7.3% of company revenue. However, B2B companies are generally spending much less on marketing than their B2C counterparts.
B2C Product companies are spending on average 17.2% of the firm’s total budget and 10.1% of firm revenues on marketing. B2B Products companies, on the other hand, have been spending a measly 8.5% of the overall firm budget, amounting to roughly 5.4% of firm revenues.
Service companies show a similar trend in spending. B2C Services companies have been spending around 11.6% of their firm budgets on marketing, which comes in at about 8.9% of firm revenues. B2B Services companies are spending 9.6% of firm budgets and around 7.1% of firm revenues.
B2B firms are spending around 35-40% less on marketing than their B2C counterparts, and some B2B industries are investing even less into marketing initiatives.
Out of all B2B companies, the ones with the lowest marketing spend as a percentage of firm budget and revenue were Energy, Mining/Construction, and Manufacturing.
If companies in your industry are generally not investing in marketing, does that mean you should reduce your marketing spend?
The short answer – no.
One of the hidden truths behind these statistics is that marketing spend varies drastically from company to company. These averages are a culmination of over 300 companies, some who spend exorbitant amounts on their marketing and some who spend next to nothing. How much you spend on marketing will be dependent on your own company’s goals, how competitive the marketplace is, along with a number of other factors.
How can you work out how much you should be spending on marketing next year?
First and foremost, start by outlining your goals and developing a strategy. There’s no sense throwing money at marketing initiatives without a set plan in mind.
What do you want to accomplish over the next 12 months? A 20% increase in sales revenue? Move into a new market? The size and complexity of your goals will directly influence how much budget you need to set aside for marketing.
Now you have an overarching goal in mind, you can start determining what needs to be done to reach that goal. If revenue needs to increase by 20%, then you will likely need to use marketing to capture new leads and nurture them through the sales process. Initiatives to help you reach this goal could include website design, content creation, software, PPC advertising, or any nuber of other things.
There are countless marketing initiatives you could put the budget into, but at the end of the day, you can’t do it all. Choose a few initiatives that you feel will be most effective and then do some research into what the cost of executing those will be. By putting some time into actually researching the initiatives, you’ll feel more confident in your plan and have a far more realistic expectation of cost.
Remember, always budget on the higher end of your expectations. If it could cost between $5000 and $7000, budget $7000. It’s far better to surprise yourself by spending less than budgeted as opposed to more.
Once, you’re happy that you have a rough estimate of cost and a basic strategy planned out; you’re well on your way to knowing how much budget to allocate to marketing. The final step will be analyzing if the number you’ve come up with is reasonable in relation to the rest of your company budget and cash flow. If it is – fantastic! If not, make some (realistic) tweaks and cut out any “nice to have” initiatives.
So what’s the answer?
In summary, what’s the answer to how much should B2B companies budget for marketing? It depends. It depends on your specific company and goals. There’s no cookie-cutter rule that will work for everyone and ultimately it all comes down to careful planning and research.
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About Gail Moch
Gail has a background in marketing and technology that she puts to use as ActiveConversion's marketing manager. She has a passion for innovation and creativity that she applies to all aspects of her life. When she isn't at the office, Gail can be found relaxing with her husband and two dogs.