Three B2B marketers discuss how to approach the task of creating a robust and sustainable budget strategy.
In a world where budgets are shrinking and marketers are asked to do more with less, mastering how to align marketing spend with business objectives has become a finely tuned art.
With B2B marketers expected to drive profitable growth through building new and existing customer relationships, they are under pressure to find better ways to sync budget priorities with measurable business outcomes.
When budgets shrink
The most recent Gartner CMO spend survey
revealed marketing leaders carry an enormous burden to justify past budget commitments and deliver returns.
The report found that after three consecutive years of increases, marketing budget growth stalled in 2017-2018. Budgets slipped from a peak of 12.1 per cent of company revenue in 2016
to 11.3 per cent in 2017.
The report also found evidence CMOs are either too near-sighted to be strategic or too “visionary” to deliver against marketing’s objectives. The result is a lack of focus on metrics that matter.
Linking marketing activities and associated spend to demonstrable business outcomes and revenue generation is more crucial than ever, experts say.
“One of the main challenges when putting together a B2B marketing budget lies in having a clear understanding of your goals,” says Roman Daneghyan, CMO of animation video company Renderforest. “If you know what goals you’re going to achieve by spending some amount of money, you can have the best ROI. But if you don’t have the clear picture of how and why you’re going to reach your goals, you have to seriously think about whether you risk potentially wasting your budget.”
Moving from perceived cost centre to revenue engine
Brad Stevens, head of marketing at accounting software company Reckon, says B2B marketers must understand their business goals thoroughly – particularly those relating to sales – and align the marketing execution plan accordingly. Whether it’s generating new leads or maximising opportunities with existing clients, this is how marketing becomes an effective revenue engine for the company.
“As marketers shift their focus to defining strategies based on business goals, they will continue the march forward to being recognised as a growth engine for the organisation,” Stevens says. “Marketers with a revenue focus should have a clear understanding of the cost to acquire, and should be constantly analysing optimisation opportunities and digital/sales channel attribution.”
With the generally longer sales cycles in B2B than B2C and the complexity of influencing buyer committees in larger enterprises, Stevens says a key challenge is justifying marketing expenditure immediately because it often doesn’t present an apparent short-term business benefit.
“This reality can make an ROI dashboard look rather alarming if no immediate revenue is being recorded,” Stevens says. “To address this challenge, building a sales pipeline must become as much of a focus as the end-conversion result, which helps provide a future view of the organisation’s business health.”
Flex your financial planning muscle
A lack of financial-planning muscle and budgeting immaturity presents significant risks to CMOs, the Gartner survey revealed. Nearly half of the CMOs surveyed rely on basic budgeting methods that roll last year’s B2B marketing budget into the next financial period, or incrementally apply a percentage increase or decrease. Having an overly complicated budget strategy also delays approvals and sign-off, so simplicity and clarity are essential.
“Keep it clear and keep it concise,” says Stan Tan, the digital marketing manager at Selby’s, an Australian printing company with clients such as McDonald’s and Mercedes-Benz. “Avoid creating a plan with ‘what if’ scenarios and over-elaborating every minor detail. The longer your proposal, the less likely it will get approved and [it will] get pushed to the side.”
Renderforest’s Daneghyan says you should be realistic about your campaign needs, and hold back from spending too much, too soon. “Don’t spend too much when you’re starting out on your budget,” he says. “Each campaign is flexible. If you see you’re not going to meet your goals, you can always increase your budget. Test, see how it works, test again, and do this all the time. In this way, you can measure the ROI of your campaigns.”
Clockwise from above: Roman Daneghyan, Brad Stevens and Stan Tan
Regular budget reviews give you room to improve. Schedule quarterly business reviews with cross-functional teams to allow for adjustments to the plan, too.
“One of the most common mistakes marketers make is failing to check the performance of their campaigns every day,” Daneghyan says. “Yes, every day
. It should be an essential part of your daily task list, especially if you work with large enterprises. Even one day of poor campaign performance can make
“By tracking everything during the campaign, you can make your budget alignments better for next time. This is very important, because if we don’t learn based on our mistakes, we’re not going to move our marketing function forward.”
You should also anticipate potential revenue-impacting “curve balls”, from external factors such as a changing competitor dynamic to internal roadblocks such as delayed product releases, Reckon’s Stevens says.
“The data-driven approach is also a key consideration,” he says. “Review last year’s marketing budget and execution of activities. See what worked, what didn’t, support the assertions with quality data and deduce what else you should be trying.”
Beyond what he calls “the basic marketing budget essentials”, Stevens says you shouldn’t be afraid to apportion some of your budget to try new initiatives.
“You should be adventurous, particularly in the ever-changing digital marketing landscape,” he says. “This ensures you’re effectively reaching your target audience and delivering compelling and relevant experiences above and beyond your competitors.”
Take control of your B2B marketing budget
Selby’s Tan says marketers need to understand that B2B budgets are governed by critical considerations that differ from B2C marketing. “In B2C, your marketing spend is determined by the traffic, leads and sales you generate,” he says. “While traffic, leads and sales are important [in B2B], there are other layers you have to take into consideration.”
One is client fit – how much budget is allocated to good versus poor performing segments.
“In our business, we separate clients into segments or groups,” Tan says. “A good performing group for us is marketing agencies and one of the worst performing groups is cafes. The difference in spend on average between these two groups is as high as 5000 per cent, meaning marketing agencies in general spend 50 times more on average than our cafe clients.”
A second layer is operational – how much time and money is spent onboarding or maintaining clients. Considerations include costs for sales, customer service, finance and legal.
A third layer is sales and marketing alignment, and how the business determines what is a lead. “In the B2B environment, marketing has to generate, filter and nurture leads,” Tan says. “After all that, when this lead is SQL-ready, [they] pass this onto sales.”
The final consideration is ensuring ROI exceeds 100 per cent. Tan says this is particularly crucial in a B2B business, which generally has higher overheads than a B2C. “For every $1 you spend, you would need at least $4 in return,” he says. “For example, there are costs to employ a sales team, maintain the account, send invoices to the client and so on.
“You also need to look at the bigger picture when creating your marketing strategy. Consider how your marketing campaign will affect customer service, sales and operations.”
Further reading: Operation data: turning insights into strategic decisions
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