One of the questions owners of B2B companies ask me all the time is “How much should I spend on marketing?” Chances are, if you own a company like this—one that sells to other companies rather than consumers—you too aren’t sure how to answer this question.
There isn’t a “one size fits all” answer to this question, such as that every B2B company should spend X% of its revenue on marketing. Still, based on my work in the trenches over the past 10 years with B2B companies big and small, I can share here some rules of thumb.
The first step is to consider these five key variables:
Companies in sectors such as software or design traditionally spend big on marketing, while those in commoditized industries or ones with thin margins lay out next to nothing. It’s important to know the benchmark marketing spend in your sector in order to help determine your own spend. One way to do this is look to your industry association. These organizations often do studies across their membership to determine how much members spend on a variety of business functions, including marketing.
Your company’s size
Large businesses, ones with revenue topping $100 million, usually spend a smaller percentage of their target revenue on marketing. A small company needs to spend a higher percentage in order to build its brand and generate sales leads. For example, a company with revenue of $150 million might generate a tremendous ROI from spending just 1% of its target revenue on marketing, so a marketing budget of $1.5 million would suffice. But a company with revenue of $2 million needs to spend more than 1%, because $20,000 won’t be sufficient to build brand awareness and gain market traction. A company of this size may need to think of spending more than 2.5% ($50,000-plus) in order to get meaningful results.
The position you desire in your sector
Companies that want to establish themselves as leaders or premium providers in their sector will likely need to set aside a larger marketing budget than ones that are just looking to be price competitors.
Your target market
Some buyers and influencers are harder to reach than others. For example, a company selling to the CEOs of major hospitals will likely need a larger budget that one that is targeting purchasing agents for small and mid-sized health-care clinics. In order to set an accurate budget, you need a sense of how challenging, and therefore costly, it will be to get a message through to a particular target market.