With the long, multi-touch sales cycle of B2B products, there’s rarely a one-to-one relationship between marketing tactics and deals closed. If a prospect requires five or 10 or 15 different promotional touches before actual buying, which approach gets credit for the sale? If a deal is assigned to one campaign for the purpose of tracking ROI, does that mean the other tactics are wasted?
With corporate budget season upon us, these questions are more than rhetorical. Because every company and market is different, there’s not a universal recipe for marketing budgets. But it’s valuable to explore the decision making and trade-offs that go into effective budgeting to support digital marketing strategy for B2B companies.
An example in SaaS
To ground our discussion, let’s suppose you’re the CMO of a B2B software company with a $50 million operating budget. Your team relies on five digital tactics for brand awareness and demand generation:
On average, marketing represents 12% of a typical organization’s budget and 9.8% of overall revenue.
A lot of overhead ends up in that figure: salaries, benefits, software costs, etc. For the sake of this exercise, let’s say that 3% of your organization’s budget will go directly toward programmatic marketing costs for campaigns.
Consider your marketing budget tradeoffs
This leaves $1.5 million to spend on five promotional tactics. An easy – but unwise – solution would be to simply split the money evenly and give each tactic $300,000. That amounts to $25,000 per month for each channel to pay for search engine text and display advertising, retargeting, email marketing, paid social media, copy writing, video production, webinars, and other content.
Suddenly, $1.5 million might not feel like a lot of money. Here are some considerations for how to prioritize that spending for maximum effect:
- Scrutinize not just the number but the quality of engagement and leads generated by differs digital marketing channels. Someone who spends an hour in a webinar is a more committed prospect than someone who interacts once with the website. Gather any information you can, including feedback from the sales team, to inform the weight you give to contacts resulting from different parts of your lead generation.
- The relative maturity of each tactic also should influence your choices. You might know your competitors are moving into mobile-focused ads, and that your organization needs to follow suit. At the same time, the current budget supports a mature and productive content marketing campaign. Do you pull money out of something that you know works to try something new? Ensure your leadership understands the tradeoff and set clear KPIs for new endeavors so you can change course quickly if an older tactic has higher ROI.
- Upfront costs vary substantially between tactics. Search advertising can be purchased in small increments and scaled up or down quickly. By contrast, a podcast or a video series will have longer lead times and higher upfront costs. Give weight to your organization’s maturity and financial position and decide how much you want to prioritize flexibility in the year ahead.
These questions can provide a starting place as you begin sketching out your budget for digital marketing. Dividing spending among channels always involves a degree of guesswork, but you’ll have the best chance of success with a data-driven, deliberative approach in coordination with your sales and business leaders.
Measure what matters for B2B
Conversions and leads are the go-to measures of success in digital marketing. In the market for B2B technology, though, the standard KPIs can become less insightful when success means a handful of very large deals. The number of qualified, sales-ready leads may be relatively low if you’re selling a high-cost product or one with complex IT integrations. At the same time, a long sales cycle with multiple touchpoints makes sales hard to attribute across the marketing channels an entire buying committee has engaged with over weeks or months.
Lead scoring is a valuable tool for qualifying prospects, but it also provides a useful metric for studying the relative value of marketing tactics during budget discussions. In this context, your CRM can offer insight that’s more qualitative than quantitative. Select a sample of your most profitable deals from the previous year and map out the buyer’s journey from the data you’ve collected at each touchpoint. When did they first “raise their hands” and invite further contact with your company? Was it a white paper download? An email signup? A landing page from a search ad? Which channels generated the most leads that made it to close? Conduct the same comparison for assets viewed by your new customers as you nurtured those leads through the information gathering and decision stages of the sale. As you look across the journeys that new customers took from discovery through the purchase, you can uncover patterns that back up your decisions to invest more in one channel over another.
The big picture: Calculate your marketing ROI
Once you’ve examined your spending from a tactical level, company leadership will want justification for your proposed budget from a business planning standpoint. On its face, return on investment from marketing is simple arithmetic: spending/net profit=ROI. For the scenario above, let’s assume your organization sets a target of 10 percent growth from new sales with a profit margin of 20%. With a $50 million operating budget, that means the marketing team will be responsible for generating $5 million in new revenue over the next year, of which $1 million will be profit.
We’ve assumed $1.5 million will be available for digital marketing. That means your efforts across campaigns must generate at least 1.5x ROI ($1.5 million in spending/$1 million in profit=1.5). This metric gives you a benchmark for evaluating each tactic as you prioritize resources for the next year. For some channels, especially paid digital and social campaigns, figuring this out is as simple as pulling a report from your dashboards. For others, like email, blogging, influencer outreach, and brand awareness efforts, ROI will be a best-guess based on what you know about your sales cycle and how much value you believe mid-funnel content contributes to sales.
No one expects CMOs to have a crystal ball that reveals the effectiveness of every action their teams take. But if you approach the budgeting process with realistic targets in mind and data to back it up, you can confidently advocate for the digital spending you need to grow the business.