Every business-to-business company is different. Every industry is different. But it is possible to determine the right amount you should be spending on your branding and lead generation efforts without taking a bath.
This post covers how to set a B2B marketing budget, including breakdowns of how much you’ll need to invest on executing your preferred strategies and vision.
“What percentage of revenue should I spend on marketing?” “How much do companies spend on marketing?” “What should my marketing budget allocation be?”
I get asked the above questions more often than any others. It doesn’t matter if I’m at a networking event, fielding an inquiry from a prospect, or knee-deep in marketing strategy with a client. They always come up.
And the answers vary.
The U.S. Small Business Administration recommends spending 7-8 percent of gross revenue on marketing and advertising if you’re doing less than $5 million a year in sales and your net profit margin is in the 10-12 percent range. You’ll also often hear a blanket statement that you should spend 10% of gross revenue on marketing. Other statistics are all over the map.
My answer? It depends.
There are so many factors to consider when setting a B2B marketing budget. It’s hard to give good advice without learning a few things first.
You can’t set a B2B marketing budget without answering these 10 questions:
- What is the current state of my brand?
- Am I doing business locally, regionally, nationally or globally?
- How competitive is my market?
- Are there entrenched 800-pound gorillas in the industry?
- Is my product or service offering a known need, or does it solve a known pain with an entirely different approach?
- What is the cost and value of your product or service?
- What is the lifetime value of a customer?
- What is the size of your internal marketing team?
- What kind of support does your sales team need?
- What do you consider “marketing” vs. “sales”?
Once you’ve fleshed out the above details, it’s time to get to work.
Step 1: What to Budget for Strategy
One of hardest parts about setting a B2B marketing budget is knowing where to begin.
In my experience, successful B2B companies start their marketing efforts by first investing in their brand. This means positioning, messaging, visual identity, website and supporting collateral all need to be defined.
If your brand is lock-down rock solid, your positioning clear, your messaging persuasive, your visual identity polished and consistent, and your website is converting leads, you can skip to Step 2.
If not, then continue.
So, how do you define these brand components? Here are a few ways:
- Conduct primary research
- Examine what the competition is doing
- Perform asset audits to see what’s working and what isn’t
- Survey long-time end-users or customers
- A/B test messaging and copy in the market
If you’re tackling this in-house, expect to invest 150-200 hours to get the answers you’ll need. If you want outside professionals to help guide, research, craft and codify this for you, figure $10,000-$20,000 as a safe budget range for branding.
Any more and you are likely paying too much. At the high end, you can invest $100,000+ in a high-priced Madison Avenue advertising firm that will show you plenty of mood boards and conduct lots of focus groups before landing on a visual scheme.
For most business-to-business companies, branding is best done when it consists of a thoughtful, iterative process that walks through a series of options for logo, typography, imagery style and more. The number of stakeholders, revisions, sub-brand/product-level treatments, and designers will all impact cost, but $10,000-$20,000 is a safe range for a professional B2B company branding or rebranding process.
Step 2: What to Budget for Your Marketing Team
Now that you have a branding plan, it’s time to figure out how to deploy your branding assets. This means identifying lead generation and brand awareness tactics, measuring results and refining everything as you go.
We call this strategy. And implementing one takes bodies – quite a few of them, in fact.
The first question to ask when you set a B2B marketing budget: Should we pay for an in-house marketing team, or outsource to a B2B marketing agency?
A versatile marketing director in a mid-size metro market at a 100-person company will command $100,000/year in salary and cost a company $126,000/year when fully burdened.
The same role in New York City or San Francisco will cost 25% more … at least.
In either case, the director is going to have a finite skill set. Maybe she’s a great strategist, knows her way around WordPress and enough about marketing sub-disciplines to manage others – but she’s still just one person.
The rest of the team will have to fill out like this:
- Marketing Manager – will either possess a valuable point solution skillset or be a generalist
- Content Marketing Writer – will handle short- and long-form copywriting
- Digital Marketer – will manage PPC and other digital ads
- Graphic Designer – will make beautiful collateral and creative
- Public Relations Manager – will handle pitches, placements and press releases
- Social Media Coordinator – will cover your social channels and presence
- Trade Show Coordinator – will manage trade show planning and vendor relationships
- Web Developer – will manage your website design, hosting and optimization
In practice, even with several talented, cross-trained employees, it still takes a small army with a variety of skillsets to effectively compete in a B2B industry.
The reality? Most companies can’t keep up.
We know this because in our 2018 State of B2B Marketing benchmarking study, 62% of marketing professionals said a lack of bandwidth is a leading challenge.
The most attractive solution for B2B firms is a hybrid model. It usually looks like this:
- A full-service marketing agency to drive strategy, keep ears to the ground and do the lion’s share of the work
- A small, in-house marketing team of 1-2 people to collaborate and offer institutional knowledge and industry expertise
Costs for full-service B2B marketing agencies vary. But plan to invest $6,500-$12,500/month in professional services – or about the cost of 1.5 fully burdened, in-house team members.
We’ve now run through branding and strategy. The final step will help you put your investment into motion.
Step 3: What to Budget for Advertising & Events
Finally, as you set a B2B marketing budget, you need to think about how you will get the word out. This means planning how much to invest in advertising, industry events, collateral production and so on.
According to our benchmarking survey, marketing professionals are investing heavily in content creation and digital advertising – and intend to spend quite a bit more in 2019.
With these in mind, let’s take a look at what you need to know to make your execution successful.
Understand your market realities
Let’s say you have a disruptive mid-six figure offering with a 12-month sales cycle.
You’re going to need to invest more in educating prospects, generating interest, creating industry buzz, staying top of mind and earning their confidence than a company offering a lower ticket item that is not core to a prospects’ future success.
Understand the Lifetime Value of a new customer
If the LTV of a new customer is $1M, you should be willing to invest a lot more in generating sales qualified leads than a company that has customers with an LTV of $50.
Either way, it’s a math problem: If the LTV is $1M, your margin is 25%, and you close 1 out of 100 leads generated, you should be more than comfortable spending $250 to generate a good lead. (That’s called cost per lead, or sometimes cost per acquisition.)
Try it for your business. If you don’t know the LTV of your typical customer, Neil Patel provides a good overview here.
Test your assumptions
You should never approach budgeting by saying something like: “I’m going to spend $50,000 on a LinkedIn sponsored post, $20,000 for retargeting and $10,000 on Facebook.”
Always put a plan together that includes testing. It’s easy and it can save you money.
Use your team and test creative, messaging and offers. But watch out for hyper-competitive industries with established brands. The advertising gets expensive very quickly.
For example, PPC ads in financial and legal verticals can run $30/click. In a less competitive market they may run $1/click. So, do your research and don’t try to outspend the competition – try to outsmart them.
Make the most of what you have to do.
Industry events and trade shows still play a necessary role in B2B markets.
And they can be wildly expensive and ineffective if not done correctly. A simple 10 x 10 booth at a major show can cost $10,000. The booth set up – backdrop, banners, and handouts – can run another $10,000. When you factor in event sponsoring and private parties for customers, the tab starts getting close to six figures.
So, what should your business do?
Here’s my advice – if special events are a must in your industry – plan, plan, plan. And start months in advance to maximize exposure before the event, drive booth traffic, capture prospect information, gather competitive information and automate post-event follow-up.
Here’s a checklist we created to make trade show investment easier.
Conclusion: How to Set a B2B Marketing Budget
Building a B2B budget can seem like an insurmountable task. But the process described here works. All it takes is a little time and energy, and three simple steps. Start with your brand, follow with strategy, finish with execution.