Having led dozens of marketing teams in B2B, I can tell you this is a question that is debated almost universally. Of course, the best way to answer that question is to know precisely what each lead will cost, and how many leads you need to deliver to inside sales/sales to grow the bookings pipeline to the proper size to hit your bookings target.
(COST PER LEAD)*(NUMBER OF LEADS REQUIRED) = MARKETING INVESTMENT
However, most marketing and sales teams can’t provide those numbers. In fact, that was the inspiration behind our development of ayeQ. Our team has built the engines to answer those questions for B2B companies across multiple industries. It is a beautiful thing, and we have made it available for B2B companies of all sizes.
ayeQ defines your standard marketing, inside sales, and sales process, and uses that standard process to model your sales opportunity pipeline, inside sales qualification, and marketing lead development. The output of the model is the required goals across all teams, including the number of marketing leads that need to be delivered to inside sales or sales (if you don’t have inside sales).
The cost per marketing lead is calculated over time and optimized each year. Very simply, it is the marketing spend divided by the number of leads generated, calculated from historic data. Of course, using Strategy Automation drives down your cost per lead significantly over time, with companies using ayeQ seeing a decrease in cost per lead of 50 – 200% within the first 6 months of implementation. So, we get to a reasonable prediction of cost per lead once the system has been in place for at least a few sales cycles.
So, what if you don’t have ayeQ? It is probably safe to say that you also don’t have clean historic data to calculate the above. Here are some guiding principles that will allow the marketing executive to have a meaningful conversation with the rest of the executive team.
How to benchmark the marketing budget.
Marketing budget “rule of thumb” for B2B technology companies is 8 – 10% of revenue or 10 – 12% of budget, depending on the competitive environment and company’s maturity and growth targets.
- If you are an early-stage company and investing for rapid growth, or have received funding and are operating at a loss, use the % of budget number.
- The higher your growth targets, the more you should lean toward the higher end of the range.
- If you are a more mature company with good brand equity (the market knows who you are), you can lean toward the lower end of the range.
- If your solution is charting new territory in the market (i.e., not an established market space), you need to be at the higher end of the range. You will need to make the case for your solution where existing budgets in your prospect companies don’t exist. That requires education of the market.
- If you are facing significant competition, you need to be at the higher end. Obviously, you will need to overcome market noise.
What does the marketing budget cover?
People, Programs, Systems. There is always a tradeoff between your human resources and your paid programs. The rise of social media has provided a low-cost channel for content distribution. Content marketing requires humans to write content. You either have them on your team, or you budget for outside writers/thought leaders. If you have people who write fantastic content, and you are in a market that appreciates thought leadership (e.g., not a transactional/commodity market), you may want to spend more of your budget on people. Where you don’t, you will need to spend more of your budget on paid programs and media. Regardless, you need the supporting systems to run marketing and sales efficiently, such as a CRM and Marketing Automation system.
What kind of programs should I invest in?
Unfortunately, that is dependent on your market. To select your programs, you really need to understand your buyers and influencers, and where they get their information. If you don’t have the luxury of market surveys and persona development, you can at least ask people you know in the same roles as your prospects (maybe current customers) as an initial trial. Then you test market, and ramp up where you see success.
Here are buckets to consider, which are typically sections of a complete marketing budget:
- Paid Media – Advertising (usually online), sponsorships, co-branded web events, email list rentals, online promotions, email list rentals, etc. These tactics are usually negotiated with media channels in your industry. They should have a media kit that outlines their programs.
- Direct and Email Marketing – Targeted direct mail and email database marketing.
- Search Engine Marketing (SEM) and Search Engine Optimization (SEO) – Important for established markets where prospects are searching for your solution or content.
- Partner Marketing – Co-branded programs in which you and your partners can leverage each other’s networks.
- Social Media – Your content and posting is done with your people, but you may use paid programs in some of these channels to boost the visibility of your posts.
- PR – typically a low-cost, high-touch channel, if you have a lot of newsworthy content (don’t use this channel for marketing promotions).
- Events – This is typically a large part of the marketing budget for emerging companies. Over time, we tend to see this channel as less effective relative to other marketing programs, although your sales team may prefer events from a relationship-building perspective. Regardless, COVID-19 has taken this off the budget for the foreseeable future.
- Analysts – This channel may be significant in your market segment. You will likely have to invest in subscriptions to analyst organizations to get more visibility and interaction with influential analysts.
When should you make the investment?
As you ramp up marketing efforts, our suggested approach is to be conservative and show results first, then optimize and add or expand programs. However, some of these programs will require sustained execution to start showing results. So that is a bit of an art.
Can you be successful at a lower investment percentage?
Yes, you can. It requires great cleverness and creativity. This is the “it went viral” scenario. Just be careful here – if you have something that goes viral, make sure it is building the brand you want to build. It is very difficult but obviously possible.
I hope this has been helpful to you. To learn more about how ayeQ creates your marketing and sales engine, and calculates your required marketing investment, read What You Need to Know About Predicting Revenue or send us an email at .
