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How much should you spend on B2B marketing?

I just finished a bit of reading about sales and marketing spends; it was quite eye-opening (or should I say wallet-opening).

In the just-released Gartner CMO Spend Survey 2015 – 2016, two of three marketers expect their budgets to grow in 2016 by an average of 11%.  More interesting to me was Gartner’s notion that due to the growing and widening scale of the digital transformation and its reach into more business functions, there is a definite movement toward tighter integration of sales and marketing, forming a “closed-loop” spend from initial awareness to engagement, conversion, transaction and repeat purchase.

For years we’ve all heard about the need for better sales/marketing alignment but the gap never seemed to shrink; by all appearances a “from Mars and Venus thing.” However, with such an emphasis on demand/lead gen and accountability for same, the dating seems to have become steadier and just maybe I’ve heard some heavy breathing between the two. And with 64% of Gartner’s survey saying digital marketing is their second highest priority, closely followed by marketing analytics, can a wedding ring be far behind?

“B2B and B2BC companies are investing heavily and using digital commerce initiatives to build more direct bridges to their end customers.”

So, as sales and marketing become more like smarketing, how will budgets shake out?

Several times a year, I’ll be asked for spending norms for advertising, or all marcom, or all marcom plus departmental expenses, etc. Our clients are looking to shape or validate a budget proposal. They may need to compare share of voice and competitor spends. Perhaps it’s funding a special initiative with an incremental budget.  Regardless, it a discussion that’s had frequently.

It almost goes without saying but I will: In theory, budgets are fluid and based upon factors like current business and economic conditions, competitive activity, company profitability and sales performance. However, I have found that generally, B2B advertising and marcom budgeting is fairly linear and hasn’t changed dramatically over the years. When I get those spend requests I reference a few databases we have to get as granular as possible. But, I almost don’t have to. You can find lots of those grains lumped together in cairns that provide reliable norms for use as a budgetary markers.

Here are some examples:

  • According to Gartner’s 2015 projection, on average, companies will spend about 10% of revenues on marketing and sales.
  • The American Marketing Association and Duke University reported in a ’14 study that B2B product businesses spend about 10.6% of revenues on marketing and sales and B2B service businesses spend 10.1%.

By comparison, B2C companies spend 16.3% and 10.9%, respectively.

Ten percent looks like one of those norms, but hold on to your hats. There are some wild differences, especially in the tech sector.

According to great round-up article by VITAL:

  • SaaS brands are spending at way, way, way higher levels. Salesforce spends 53% of revenues on marketing and sales. Constant Contact clocks 38%. Marketo earmarks 66% (EMA is a Marketo partner…thanks Marketo!!!).
  • Software giants like Microsoft and Oracle spend 18% and 14% on sales and marketing, respectively.

So, rule of thumb in tech-related categories is fagettabottit. No thumbs available, but think north of 15%.

Another interesting comparison, which you’ll find squarely on the other end of the spectrum, is B2B advertising and marcom. Carving out advertising and marcom as a standalone spend, feel lucky getting 1% of sales. Yes, one measly percent to fund media, production, direct, research, point-of-purchase (think channel showroom and dealer materials) and department expenses is very common. So is less than 1%.

Why so little? If the average spend for B2B sales and marketing is 10% of revenues, what happened to the other 8 or 9 points? Well, much of B2B activity is sales-oriented. A lot of bucks run along with the sales force and product development managers. So many times, advertising is somewhere down the priority stack.

I do think something’s missing here, besides heftier ad budgets. I think we’re missing an opportunity to tell great stories about brands, connect with larger audiences personally, get people fired-up emotionally and create more brand friendships (for more on the latter, review our philosophy ). In the scheme of things, imagine what you could do with just one-more-tiny-little percent.