How Big Should Your B2B Marketing Budget Be?

The amount really depends on you, but here's what others are doing.
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A big question that comes up in any discussion about marketing planning is, “How much should I be spending on marketing?” Of course, there’s the internal factor of how much your awesome marketing plan will cost to implement, but more often than not this question is about industry standards.

In the industrial sector, there isn’t a go-to survey that addresses this question directly. While the annual IHS GlobalSpec “Trends in Industrial Marketing” report documents which channels industrial marketers are spending their money in and where they plan to increase spending, it doesn’t paint a picture of what’s happening with marketing budgets as a whole across the industrial sector.

For that type of overview analysis, the closest reputable sources one can turn to are ones that survey the B2B sector, such as Forrester and the CMO Survey. While “B2B” doesn’t exactly map onto “industrial,” overview reports from both of these organizations are highly informative for those engaged in industrial marketing.

Historical B2B Marketing Budgeting Trends

Before we jump into trying to establish some budgeting benchmarks for this coming year, let’s review some of the recent history in B2B marketing spending.

According to Forrester’s “Focus B2B Marketing Budget Gains on Business Outcomes to Succeed in 2014” report, B2B marketing budgets were 5–10% of overall company revenues prior to 2008, excluding overhead for in-house marketing staff. When the recession hit, marketing budgets took a nosedive and ended up at 1–2% of company revenue for the next several years, slowly inching up to an average of 2.5% in 2012 and then 4% in 2013.

The current trend in 2014 has been for B2B marketing executives to increase marketing budgets by an average of 6%. The 2014 edition of the CMO Survey, which includes analyses of both the B2B and B2C marketing sectors, projects a 5.4% increase in B2B product marketing and a 6.4% increase in B2B service marketing, for an average of a 5.9% in the B2B sector as a whole, reinforcing Forrester’s projection of 6% growth.

Per both Forrester and the CMO Survey, B2B marketers seem to be waking up from a period of hibernation and beginning to increase annual marketing budgets. This can be attributed to the tenuous revival of the economy, but also likely has a lot to do with the emphasis placed on digital marketing and its ability to report more effectively than traditional methods — an important feature that helps B2B marketers demonstrate clear ROI to the executives that control the purse strings.

Ready to set your B2B marketing budget? Download this definitive guide to justifying and securing your annual marketing spend.

Current B2B Marketing Budgets

Interestingly, while Forrester and the CMO Survey pretty much agree on the rate of increase in B2B marketing budgets over the last year, they diverge when it comes to actual budgets.

Per Forrester, B2B marketing programs still net out at an average of 4% of company revenues after the 6% increases for the year. The CMO Survey, on the other hand, documents marketing spending at a significantly higher percentage of company revenues and demonstrates a marked difference between B2B product marketing and B2B service marketing budgets. According to the survey, B2B product marketing budgets are slated at 8.1% of firm revenues while services budgets make up 5.8% of overall revenues, for an average marketing spend in the B2B sector of 6.6% of revenues.

The CMO Survey also reports that smaller companies are spending much higher percentages of company revenues on marketing when compared to their larger peers. Here’s how things break down according to the report:

Company Revenues Marketing Spending as a Percentage of Company Revenues
< $25 million 13.9%
$26 – 99 million 6.1%
$100 – 499 million 5.9%
$500 – 999 million 2.9%
$1 – 9.9 billion 6.7%
> $10 billion 5.5%

Why companies with less than $25 million in revenues are proportionately spending so much more than larger companies is unclear. It may be because they have innovative products and anticipate rapid growth and substantial returns facilitated by marketing. Or, it could be because they feel the need to make aggressive moves to seize market share. It’s a curious statistic that could definitely use some further study.

Where B2B Marketers Are Spending

While Forrester and the CMO Survey may differ on how much is being spent, they both agree that B2B marketers are spending more. This poses the obvious question of where the money is being spent. According to the Forrester report, the top three areas for increase are digital advertising, content marketing, and websites.

Digital Advertising

According to Forrester, 70% of B2B marketers are increasing their spending on digital advertising, to the point that online ads have become 13% of their operating budgets.

The Forrester report doesn’t specify if the money goes toward insertions with online publications, social media advertising, search advertising, or mobile advertising. Two likely hypotheses present themselves. The first and more likely explanation is more spending on mobile advertising given the growing importance of this channel. The second is the increasing sophistication of search marketing, signaled by such milestones as the launch of Google dynamic remarketing in 2013.

Content Marketing

Next on Forrester’s list is content marketing. Per the report, 59% of B2B marketing programs will increase their budget for content marketing, taking it up to 12% of their budgets.

While it’s no secret that content marketing has become an integral part of any respectable marketer’s mix, this tendency to increase spending likely has to do with the industry-wide realization that not all content is good content, as well as the aggressive rise of marketing automation over the last few years. As one of Marketo’s latest eBooks makes clear, “Marketing Automation Runs on Content.”

Websites

Lastly, Forrester documents that 45% of B2B marketers will increase the amount of money they spend on their website, bumping the line item up to 8% of their budgets.

This increase is likely due to the fact that many B2Bs are investing in mobile-ready websites. Whether they choose to go with an adaptive site or a responsive site depends on their particular needs, but its goes without saying that one needs a website that’s capable of engaging customers on their smartphones and tablets at this point.

How to Determine Your Budget

All of the above isn’t meant to suggest that all B2B or industrial companies should simply follow the crowd and start budgeting as much as others for their marketing. Nor does it make sense to start spending money in the same areas.

Before you can derive a financial figure to work with, you have to create a plan that supports your business goals and justifies your marketing budget.

First and foremost, you need a strategy that will help you determine where you need to spend and help you convince your stakeholders that the financial commitment is worth it.

If you need help with these first steps in the process, there’s a great new resource on the Industrial Strength Marketing website that deals with this specific issue. It’s the “2016 Industrial Marketing Budget Guide” and even includes links to a free template to help you when putting your budget together.

Responsive Website Guide
Industrial Marketing Budget Guide

About the Author

Jake Gerli


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