The Problem
The problem with deciding the marketing budget in B2B companies is that you don’t know where to allocate funds which will bring optimized results.
- What channels will work?
- How do you allocate budget to ROI generating resources?
- Where to start the budgeting process?
I have listed down each point in detail to explain the budgeting process
- Know where the competitors are spending
- Analyze the past three year’s data
- Establish Marketing and Business model:
- Average contract value
- Average Sales Cycle
- Closing values
- Determining the spends
- Channels to decide
Know where the competitors are spending
When developing a B2B marketing budget, the first crucial step is to analyze your competitors. Examine their activities, particularly in areas such as paid search, display ads, and industry-specific advertising. If your competitors are heavily investing in these channels, it may be necessary for your business to match their efforts to remain competitive.
To gather insights into your competitors’ digital advertising strategies, consider utilizing the following tools:
Semrush provides valuable data on organic keywords that competitors are ranking, allowing you to assess your competitors’ performance in this area.
Google Ads Transparency Center offers a direct view of the specific ads your competitors are currently running, giving you a clear understanding of their messaging and targeting.
Similarweb provides a data overview of spend made in PPC search ads and also estimates how much the competitor is spending per click for a keyword.
Facebook Ad Library shows you the creatives and time duration for the ads being run on the meta platform. You can also see the total budget spent, the objective of the campaign, audience size, and impression count.
In addition to analyzing specific digital advertising tactics, engaging in general benchmarking against your competition is essential. Conduct an industrial competitive analysis to assess various aspects of your competitors’ performance, including their strengths, weaknesses, and opportunities for improvement. By thoroughly understanding the competitive landscape, you can refine your own marketing approach, identify areas where you can differentiate yourself, and enhance the overall effectiveness of your B2B marketing efforts.
Analyze the past three year data
Once you have analysed the competitor’s data, it’s important to analyze the past year’s data and numbers. You need to know :
- What channels worked for you in gaining brand awareness?
- Which channel brought in more quality leads?
- How much budget did you spend to provide direct support to the sales team?
- Did the exhibition bring in leads that can be converted?
- Are you willing to discontinue the channels that are not working for you?
In Manufacturing-based companies, past data plays a very important role, as the industry dynamics does not change much. This make it easy for the marketing team to plan the budget based on the past data.
Establish Marketing and Business model
The next step is determining the business objectives and business goals. By setting specific measurable, and realistic goals gives you an clear vision about the outcomes of marketing activities.
Again, the past data will help you achieve set realistic goals. In Industrial/manufacturing marketing the value of sale, time taken for a sale and repeat business matters the most.
Average Value of Sale: Each sale has a significant impact in any manufacturing company. So one needs to analyze how much marketing budget was spend to get that particular sale. This will give you the average cost to acquire each customer over a specific time period. Budget needs to be decided or changed based on the insight you get from the value of sale.
Time taken to close the sale: The Sales cycles in Industrial marketing is uncomfortably higher. Generally the sales cycle takes around 9-12 months. So based on the past data, you should be able to estimate how much budget was spent on marketing activities to keep the sales frequency moving. Here “Sales velocity” needs to be determined to estimate the budget.
For example, if a business has: 50 opportunities, An average win rate of 25, An average deal size of INR 1,00,000, and A sales cycle that typically lasts 60 days.
The sales velocity is: Sales velocity = (50 * .25 * 1,00,000) / 60, = $125,000 / 60, and = INR20833.33.
This means that the business is bringing in roughly INR2,0833.33 in revenue each day.
Determine the spends
Its time to determine the spend value on executable marketing activities. Generally, a percentage of total revenue is shared as marketing budget. According to Hubspot, B2B product industries spend about 7.8% of their revenue on marketing. Again, it’s important to remember there’s no one-size-fits-all approach to your B2B marketing budget. Your business is unique, and factors such as company size, industry competitiveness and the scope of marketing objectives play a pivotal role in tailoring a budget that best suits your specific needs and maximizes the effectiveness of your B2B Industrial marketing efforts.
Actually spending the Dollars
The Last step in Budgeting is ensuring you have all the components and toolsets covered, where you can spend the budget. I have created a template that is specific to Industrial marketing, intended to help you create Budget and Forecasting with ease.
Your strategy involves various components, each requiring a piece of your budget:
- Performance Marketing Platforms like Google search, Meta Ads etc.
- Brand Awareness tools
- Website development and maintenance
- PR activities
- Sales Automation tools
- Content Marketing
You should always leave an extra budget for trying out new activities and experimenting with trends in the industry. Tracking and Analysing the difference on a quarter basis will help you spend the budget more diligently. It will help you in being flexible and responsive to strategic initiatives of business.
If you are a Marketing Manager, think of this blog post as a start to a new way of things in managing your marketing budget. Use and implement this template to ace your marketing game. If you are an owner of a manufacturing company, ask your Marketing managers to present the marketing budget based on the above format. This gives you a clear perspective and helps you spend your budget where it’s required.
Last but the most important question to ask: How much can you spend?