Every B2B marketing strategy requires a budget, acting as a financial guide to allocate resources effectively. This ensures alignment with company goals, adaptability to market shifts and the ability to measure and enhance performance. Follow these four vital steps to set your B2B marketing budget up for success.
Creating a budget is a critical component of a successful B2B marketing strategy. Without it, you could end up overspending on your marketing initiatives, leading to financial strain, inefficient resource allocation and a lack of clarity on the return on investment (ROI) for your efforts.
However, budgeting is more than just a routine administrative task. It’s an intricate process that requires comprehensive planning to ensure you reach your B2B marketing goals. To navigate this complexity effectively, follow these four steps for constructing a robust B2B marketing budget.
4 Essential Steps to Building a B2B Marketing Budget
- Look at competitors
- Establish your goals and model your business strategy
- Determine your spend
- Cover your bases
1. Look at Competitors
In developing a B2B marketing budget, the first step you should take is examining your competitors. Analyze their activities, especially in areas like paid search, display ads and industry-specific advertising. If your competitors are making significant investments in these channels, it might be necessary for your business to keep pace.
To gather information about your competitors’ digital advertising strategies, consider utilizing these tools:
- Semrush offers insights into PPC (pay-per-click) advertising.
- Google Ads Transparency Center reveals the specific ads your competitors are currently running.
- MediaRadar provides a comprehensive overview of a company’s media spending, offering insights into their advertising costs.
Engaging in general benchmarking against your competition is also essential. This may involve a B2B competitive analysis, which assesses various aspects of your competitors’ performance to identify strengths, weaknesses and opportunities for improvement. By understanding the competitive landscape, you can refine your own marketing approach to stay competitive and enhance overall effectiveness.
2. Establish Your Goals & Model Your Business Strategy
Next, determine your marketing goals and how they align with your overall business objectives. Knowing where you want your business to go is essential for creating a roadmap to success. By setting specific, measurable, and realistic marketing goals, you can articulate a clear vision of the outcomes you aim to achieve.
If you’re like most B2B companies, your main goal is to get leads and convert them into sales. But how can you determine how many sales you need to reach your goals? With historical data, you can effectively model your business strategy. You only need three metrics: average contract value, close rates and total revenue.
Average Contract Value (ACV)
The average contract value (ACV) signifies the average value of a contract or deal closed by your business. Understanding the financial impact of each contract is essential, as it allows you to gauge the overall worth of these agreements to your company.
Your close rates are how often a potential lead transforms into a finalized contract. This insight provides a clear understanding of your conversion rates and the effectiveness of your sales and marketing efforts.
Total revenue is the overall income generated by your business before deducting any expenses. Combining your close rates with total revenue generated provides a holistic view of your business’s financial performance.
With these three key metrics, you can determine the essential components of your business model and estimate the number of sales needed to achieve your marketing goals.
3. Determine Your Spend
After setting your goals and modeling your business strategy, it’s time to determine the amount you need to spend to execute your marketing strategy effectively. This involves accounting for advertising, promotional activities and other resources.
Generally, your B2B marketing budget should be a percentage of your company’s revenue. But the actual percentage will vary depending on your industry, market conditions and specific business goals.
If you aren’t sure where to start, consider these B2B budget benchmarks:
- Gartner says the average B2B marketing budget is about 11.2% of a company’s revenue.
- BDC reveals B2B companies should spend 2-5% of their revenue on marketing.
- HubSpot finds that B2B product industries spend about 7.8% of their revenue on marketing, while B2B services allocate 5.9%.
Again, it’s important to remember there’s no one-size-fits-all approach to your B2B marketing budget. Your business is unique, and factors such as company size, industry competitiveness and the scope of marketing objectives play a pivotal role in tailoring a budget that best suits your specific needs and maximizes the effectiveness of your B2B marketing efforts.
4. Cover Your Bases
The last step in building a B2B marketing budget is ensuring you’ve covered all your bases to adequately support your B2B marketing plan. Your strategy involves various components, each requiring a piece of your budget:
- Website, including hosting, security, regular updates and maintenance
- Content creation, including ads, blogs, videos and webinars
- Events, including trade shows and sponsorships
- Project management
- Social media
You should also leave an extra budget for your CEO’s needs and wants. They may have specific requirements or initiatives that align with overarching business goals, and having a dedicated budget ensures flexibility and responsiveness to their strategic priorities.
By thoroughly examining your plan, you can ensure all critical elements are funded. This comprehensive approach prevents oversights and establishes a solid financial foundation that empowers your marketing team to execute strategies seamlessly and achieve the desired business outcomes.
Remember to communicate your marketing budget and plan with your team and stakeholders to establish realistic expectations. This helps keep everyone on the same page and offers a clear understanding of the financial parameters and goals guiding the marketing initiatives.
Conclusion: Put Your Budget to Work
Building a B2B marketing budget is not a one-size-fits-all endeavor; it’s a dynamic process that requires agility, strategic alignment and comprehensive planning. That’s why it’s critical to examine your competitors, define your goals, determine your spend and cover your bases. By incorporating these four fundamental steps, your company can thrive and achieve its desired business outcomes.
Need help with your B2B marketing? You’ve come to the right place. Contact us to start the conversation.