According to Gartner, marketing budgets rose in 2022, as 75% of CMOs saw their budgets go up. The average marketing budget went from around 6.4% of revenues in 2021 to 9.5%. Yet, many marketing budgets are recovering from the pandemic, before which marketing budgets were closer to 12%.
Is your marketing budget seeing a similar incline? It isn't easy to justify a marketing spend of over 10% of revenues to many bosses—or even 5%. Read on to see how marketers with adequate budgets are convincing their bosses that marketing is worth the investment.
Here are the 12 steps we'll walk through to justify your marketing budget to your boss:
1. Look at Competitors
2. Prove ROI with KPIs
3. Establish a Conversion Path
4. Project Results
5. Show What Worked
6. Project Revenue Growth
7. Target the Right Audience
8. Explain Opportunities & Why
9. Leave the Budget Open-ended
10. Use Trends to Propel the Brand
11. Collaborate with Sales
12. Invite Dialogue
Let's dive in!
1. Know What Your Competitors Are Doing
Everything you do can be countered, leveraged, or bettered by direct competitors—especially if they have a large budget.
You need to know what they're spending and how they're using that money. This is important because you could end up spinning your wheels with little to show for it if your budget isn't comparable to theirs. That's a waste of money!
Showing your boss what the competitors are doing is an essential step in justifying your budget.
You don't have to hack into their spreadsheets to find this out. You can deliberately track their marketing activity by following and subscribing to them and using SaaS competitor analysis tools that give you insight into what they're doing on:
- Social media
Then estimate the costs of those activities. If you determine that your competitor is spending about 12% of revenues on marketing and your boss has you spending 5%, then you know you have a problem.
Your boss may not understand what a marketing plan costs. Competitive analysis is a lot of work. But it's critical to getting the highest B2B marketing ROI. Remember: In addition to using this information to justify your marketing spend, you'll have a head start generating or revising a digital marketing strategy and plan based on your observation.
You're over halfway there when it comes time to figure out how to set a marketing budget. This is time well spent.
2. Prove the ROI Using KPIs
You need measurable key performance indicators (KPIs) to track performance. This provides the data to back up your marketing decisions.
Set up systems and technology to track KPIs across the buyer's journey. Start making connections (for the boss and yourself) between Top of Funnel KPIs (demand generation, brand awareness) and the Bottom of Funnel KPIs the CFO cares about, like:
- Revenue/sales growth
- Customer retention rate
- Customer acquisition cost
- Lifetime value
They don't care how many people shared a post this month or the "buzz" you're generating. You know these actions impact revenues. But you need to show and KNOW your data.
So, make your results undeniable. Your B2B marketing spend, directly and indirectly, impacts the numbers CFOs care most about.
Once you start tracking the right KPIs, something astounding happens beyond knowing your numbers. You realize your power to influence those numbers consistently to:
- Increase website traffic
- Generate more leads
- Shorten the sales cycle
- Increase revenues
- Turn the engagement of existing customers into new customers
3. Establish a Clear Conversion Path
One of the best ways to demonstrate how marketing activities impact the KPIs that matter to the C-Suite is by mapping out the buyer's journey and building measurable pathways that align with it.
- "X" percentage of website visitors convert to Marketing Qualified Leads (MQL)
- "X" percentage of MQL become Sales-qualified leads (SQL)
- "X" percentage of SQL become customers
- The average order size generates "X" revenue
You've clearly shown through data how what you're doing at the top (guiding visitors to the website) = revenues (in the end). But more than that, if you can show this with the data, you have a path that visitors follow consistently, which means predictable revenue growth, which leads us to the next point.
4. Project Results Wherever Possible
Ideally, you need to get to the point where you can say give me "X" budget, and I'll generate "X" revenue. That's what your boss wants to hear.
When your CFO sees that you can reliably predict the next quarter's revenues based on what's happening at the top of your funnel today, they'll be more willing to invest in marketing.
They’ll trust your judgment because you have the numbers to back it up.
Automate this data analytics process so that as you increase website traffic, the model updates to show your new revenue projections. Now, you're always ready for C-suite meetings and marketing budget discussions.
When you talk, your boss and other company leaders listen.
5. Show What Worked Last Year
Learn from your previous budget and the marketing you accomplished with that budget to inform your upcoming marketing spend.
If last year was abysmal, that's something that having a budget comparable to the competition can fix, as long as you have a solid plan.
But let's say you had a decent year. Do you know what went well and how you did it? If you tracked KPIs, then you do. You can repeat it.
On the other hand, if you were not tracking KPIs effectively, you have a mystery on your hands. Why did your marketing work? Sadly, your success is unrepeatable and unsustainable.
The CFO could even say that your marketing had nothing to do with the company's success last year—and attribute it all to the outstanding sales team and C-suite leadership.
Know your numbers. Show your numbers. And that won't happen. If you have the data to show how your marketing budget impacted revenues last year, it's easier to go to the table and ask for a larger budget next year.
The impact of your wise use of the marketing budget last year is undeniable.
So, Step 1. Demonstrate through data how you were able to accomplish last year's results.
Step 2. Project what's possible if you have a larger budget this year.
6. Project Relative Revenue Growth
If your ROI is 3X or 4X budget increasing, then increasing the budget should increase revenues proportional to increased spending—even if you have to move into new markets.
7. Make Sure You're Reaching the Right Audience
The competitive analysis you performed in step one sparked a eureka moment for many. Are you sending the right marketing messages to the wrong audience or in the wrong places?
If so, you're in an uphill battle to show your boss that your B2B marketing budget is getting results. And, honestly, a lot of your marketing spend is being wasted. More money won't help if you're targeting the wrong leads on the wrong channels. How can you be sure?
B2B decisions are made by business decision-makers, not a faceless business. You need to know who those decision-makers are, what they need from you, where they hang out, and what will convince them that you're the right choice for their business.
To further complicate this, unless you are targeting decision-makers at startups exclusively, there could be up to six people you need to convince, not one. So, how do you make sure you're targeting the right people?
- Make sure your customer data is up-to-date and accurate. An estimated 10-30% of customer data is duplicated. This destroys the validity of your numbers. It lowers productivity as multiple people may be chasing the same lead. It leads to an inconsistent and confusing customer experience. You must deal with it.
- Create/Update Data-backed buyer personas. Leverage insights into your current customers to build profiles of your ideal customers. Do your homework to ensure you know who within these organizations is making the decisions. That's who you target.
- Combine decision-makers. Once you have contact records for multiple decision-makers from one company, your marketing should target those decision-makers in a unified way.
- Build your content strategies around your buyer persona. Target all stages of the buyer's journey to guide decision-makers along the path to a sale.
- Pay attention to how your audience responds to content. Numbers will inform decisions. If your audience isn't responding, something is off—primarily the audience, the message, the timing, or the location.
8. Explain the Opportunity & Why It's Worth It
Your boss cares a lot more about "Why" and "What" or even "How Much". If the opportunity (the why) is worth it, then the others don't matter to them.
Make sure you're prepared to clearly show using data what your company stands to gain by increasing the budget like:
- Increasing market share
- Improving the profit margin
- Driving engagement, which, thanks to the clear pathway you've shown through data, they know equals increased revenues.
Show the anticipated ROI so they stop focusing on the costs. Summarize it so they have a clear visual. This is what you ultimately want them to take away from the meeting.
9. Leave the Budget Somewhat Open-ended
Your marketing budget should outline where you plan to spend the money. Common marketing expense categories include:
- Marketing & Advertising (labor, ad fees, content creation, email, etc.)
- Consulting / Marketing Agency Retainer
- Social media management
- Marketing software and technology (automation, analytics, content creation, CRM, etc.)
- Traditional Advertising and Marketing (Print, TV, Radio, Streaming, etc.)
- Events and Special Promotions
Most of the above expenses are predictable when creating the budget. But that's not always the case.
Sometimes opportunities arise. You need to be able to capitalize on them. Or unforeseen economic uncertainty arises. You need the agility to navigate it.
Because of your data-driven budgeting, it's easier to go back mid-year or even mid-quarter to say we need more money. Better yet, it's easier to ask for a somewhat open budget. That's what you want—the flexibility to say "here's a great opportunity. We can spend more here to grow revenues faster."
10. Show How You'll Use Trends to Propel the Brand
Marketers need to follow and leverage trends to get the best results. Even if you don't know precisely what the upcoming year's viral TikTok challenges will be, you can demonstrate through your marketing plan that you track, measure, and adapt to changes rather than slapping last year's marketing plan onto this year's budget.
Review your marketing plan to make sure it aligns with current trends.
11. Collaborate with the Sales Team
It's hard to show how marketing spend directly impacts sales if you're not actively collaborating with the sales team. You need those numbers. And you need to know how what you're doing is affecting them.
Creating an alignment between B2B marketing and B2B sales creates a low-friction path for the target decision-makers to follow, from strangers to customers to brand ambassadors.
Marketing sales collaboration best practices include:
- Developing shared goals
- Creating Service Level Agreements (that go both ways)
- Clearly defining and agreeing upon what an SQL is
- Implementing a lead-scoring system
- Aligning messaging between marketing and sales
- Automating the hand-off between Marketing and Sales
- Marketing team creating Sales Enablement Content that primes a lead for sales team engagement and helps sales close more deals
- Re-engaging existing customers to drive them back to sales for upgrades and renewals.
12. Create an Invitation for Dialogue
Data is a fantastic tool. But that's not the end of the conversation. People can see the same data and reach different conclusions. It's important to keep an open mind. Stay humble enough to listen to others regardless of how compelling you believe your data is.
Show you're open to suggestions/ideas and be flexible enough to adapt if you don't get your dream marketing budget in the first round. When you keep the dialogue open, your boss and those who influence your boss' decisions are more likely to listen to what you have to say and see the value you bring to the table.
Keep tracking KPIs and improving your conversion pathways to demonstrate how your marketing efforts impact business goals. Develop predictable pathways that allow you to forecast sales. Treat the Sales Department like the ally they are and instill the importance of collaboration in your team.
For more tips on planning a marketing budget, get our B2B marketing budget checklist.