Most B2B marketers will accept that the success of any marketing plan depends crucially on marketing budget allocation. It is the key to effective strategy implementation. The best-laid plans fall short if you do not have the right resources in the right places. Strategic budget allocation is necessary to make the move from meetings to real execution, iteration, and conversions. The following post discusses best practices when constructing a B2B marketing budget.
Why is marketing budget allocation core to marketing’s success?
Considering that all budgets come with the caveat of spending limits, getting your budget allocation right is key to having adequate reserves to efficiently implement plans. Marketers will often spend a lot of time validating their budgetary requirements because no organisation wants to misspend its revenue or capital. Resultantly, marketing budgets usually require inputs from multiple stakeholders across the organisation.
What should your marketing budget include?
Marketing budgets include everything that you and your team need to positively reach your target audience. This includes expenses related to campaigns, channels, platforms, wages, marketing technologies (CDPs, social media, data analytics, design, automation), advertising, PR, freelancers and consultants, conferences, trade shows, etc. Each of these elements needs to be accounted for in your budget with wriggle room for other revenue generation tactics.
How much should you spend on marketing?
Although the revenue spent on marketing differs a lot from industry to industry (and company to company), on average about 7-15% of a company’s revenue goes towards marketing. So all of your company’s unique requirements in terms of your revenue model, stage, funding, amongst other things factor into how much to spend on marketing. The ROI from your marketing activities also plays a role in budget allocation. As per a CMO survey conducted in 2019, on average, B2B firms allocate about 10-11% of the firm’s total budget toward marketing.
Another common question amongst marketers is: how to allocate across channels?
A common rule of thumb is the 70/20/10 rule-
- 70% of the marketing budget for channels goes towards proven strategies
- 20% of the budget for channels goes towards new strategies for growth
- 10% of the budget for channels goes towards experimentation with new or alternative channels as well as emerging channels.
How to create a marketing budget?
1. Establish your overall marketing goals
The first step to creating a budget is to determine your overall marketing goals. This involves setting your larger strategy and breaking it down to substeps. Make the steps you need to reach these goals as detailed as possible and determine the overall length or schedule of the plan. They say that the overall strategy and all its steps need to be specific, measurable, attainable, relevant, and time-bound (SMART). Elaborating on the acronym SMART and determining goals for each term is a preferred place to start.
2. Outline your plan for the year
The second step to creating your budget involves outlining the plan for the year for which you are budgeting. This involves determining the channels and strategies to be used over the year and includes SEO, PPC, web redesigns, social media, new employments — connect them with your overall marketing goals. Essentially, if the previous step is determining the long term goals, this step is all about determining your yearly goals.
3. Determine your budget
In the third step, you determine the spending to be allocated for each element of your strategy (marketing channels, SEO, PPC, etc). The process involves looking at past data of expenses to get a comprehensive roadmap of how much to allocate and then calculating the future expenses in light of your current goals. Calculate the expected costs for each initiative, account for potential expenses that could occur. Finally, divide the total budget into quarterly and monthly budgets.
4. Allocation
Allocation of the marketing budget across various channels, platforms, human resources, tools, and other marketing spending is where best practices come into play. Being efficient when determining how much to spend and what to spend is essential to reaching your marketing goals and getting in that ROI. We’ll be exploring the best strategies and practices for allocation in the next section.
5. Track your progress + Refine your strategy
This step becomes important during the actual implementation of the year’s marketing plans. Tracking your marketing activities in tandem with your budget is crucial in ensuring that you’re hitting your goals. If you find that your predictions don’t align with your actual outcomes, you can fine-tune or rework your plans to course-correct them. A marketing budget tracker essentially helps you see how your marketing plan is progressing. Moreover, comparing your progress against the predetermined goals helps ascertain the efficiency of the plan. To track progress on channels, channel-specific data like number of users, clicks on ads, website traffic, number of forms filled, registrations for webinars, downloads for whitepapers and more, can be used to check if your spends are giving you the desired returns.
6. Measure the ROI
Ultimately, your budget was created to improve revenue. So, apart from tracking your marketing budget and channel-specific metrics, one must also track and measure the ROI — this helps to see how successfully the marketing plan is progressing. If the money spent on items in the marketing plan is bringing in more returns, you can increase the budget allocation for that item next year. Vice-versa for items that are bringing in low returns.
Best practices for marketing budget allocation
Allocate more budget where you have a larger audience
A key step to creating a good budget is knowing your buyer’s journey — that is the steps that your potential customer takes on their journey from being a prospect to a paying customer. Understanding your buyer’s journey will give you key insights into which platforms and channels work best to reach your ICP (ideal customer profile), what forms of marketing ads and social media platforms your target audience prefers, and how they interact with your marketing. A few important questions to ask is how do your customers come across your product or service? What information do they need before they make their purchasing decisions? What is the cost of generating new leads and conversions? What is the revenue from each lead? — answering these questions can help you know where to allocate your budget and to better reach your customers.
The best way to ensure your buyer’s journey and what channels and touchpoints are more efficient is by investing in a good attribution system — may it be an in-house system or an attribution tool that saves both the time and effort that goes into mapping a customer journey so that the marketing team can focus on the strategy and execution of marketing’s goals.
Diversify your strategy with multi-channel campaigns + Experimentation
In the previous point, we mentioned the importance of allocating more funds to channels and platforms where your audience already exists or has a proven success rate. However, the world of digital marketing is ever dynamic with new channels and audience migrations being a regular phenomenon. In that case, diversifying your strategy with omnichannel campaigns becomes extremely important. The previously discussed 70/20/10 rule for channels is a good rule of thumb to ensure that all your eggs are not in one basket and your campaign strategies remain forward-looking.
Look out for hidden marketing costs
If you’re not careful with budget tracking and keeping an eye on where your money is going it is easy to miss out on marketing costs that may not be very evident to the campaign. Spending on product launches, promotional activities, market research, etc are critical in shaping campaigns and it is a good idea to account for additional marketing tactics.
Leverage your data: use data-driven marketing to guide your decisions
We spoke about using previous years’ data while determining your budget. However, apart from past data, the current data from tracking your metrics can be useful in determining what’s working and what isn’t. If something is not working, it is okay to cut losses and redirect those funds to strategies that are performing well. A data-driven marketing approach can help with efficient budget breakdowns as well as with course corrections where necessary. Use all the metrics available to determine the best channels as well as the potential of emerging channels.
Prioritise BO-FU marketing: this can minimise risk and improve your chances of better returns (ROI)
Prioritising BoFu (Bottom of the Funnel) marketing can minimise the risk and improve your chances of better returns or ROI as this involves targeting the bottom of the conversion funnel. The audience here is in that part in their buyer journey where they are closer to becoming paying customers and have higher intents for purchase. Ensuring that you allocate enough resources to BoFu marketing helps increase potential ROI and also minimises the risk associated with spending too much on the top of the funnel which is usually characterised by more misses than hits.
In Closing...
Budget allocation is a process that requires data and insights to figure out what channels should be allotted funds and how much. Relying on historical data and having a data-backed strategy is integral to getting desired returns from the budget allocated for marketing. Good attribution tools can simplify reporting for budgetary asks as well as clarify which channels and touchpoints are performing well and deserve more funds.
We hope this article helps you with your marketing budget allocation and helps you implement some time-worn budgeting best practices that can translate to better returns.
