B2B Marketing Blog

As we enter another planning and budgeting season many marketers are evaluating what they’ve done this year and what they should do for next year. The question often posed is “how much should my marketing budget be next year?” This can also be prompted by the direct request of senior management who needs “your budget number” to fit into the marketing line item space of their overall plan. There is no simple accurate answer to this question.

Some marketers look for magic bullet answers like percentage of sales revenue, or some monetary increase (or decrease) from last year’s marketing budget as a barometer. With very few exceptions where budget demands are more than just heavily suggested by senior management, these standard magic bullet guidelines do not best serve your marketing efforts, your sales force, or ultimately your company.

This is a reactionary approach based on parameters that can prove meaningless to future goals and performance. The simplified theories may make for interesting conversation or fodder at industry trade events, but when you are actually being tasked to perform and meet sales goals with marketing, and are being held accountable; relying on these general guidelines is an unsettling proposition.

Different thinking is required. Start with a clean slate and focus on the important sales and profit drivers for the company now, next year, and the years beyond. If you do have a marketing budget number in mind (or one heavily suggested to you) put it aside and come back to it later.

First you need to truly understand company goals and the market reality. This requires open and frank conversations with the CEO and President on their vision and objectives (both short-term and long-term) for the company. Next involves in-depth discussions and alignment with sales management and the sales force to determine what the frontline troops are facing and the support they desire to quicken sales cycles and increase their productivity.

You can’t lose sight of the fact that B2B marketing’s job is to increase sales and profit by returning more than you invested and making the sales force more productive. Talking to several other department heads for a cross-section perspective of the company situation and goals is also recommended.

Now that you have consensus from key players about what your company wants to do, you need to hold that up to the light of inspection based on the reality of what the market understands and will accept. This market-up approach enables you to discover, confirm, and/or reconfirm market conditions that exist and will affect your industries/niches prospects and the customers you serve. All company goals must be tested from a market-up perspective.

Going through a candid fact finding process will reconfirm things you already know but also open your eyes to new items that are important for company growth. Having processed the information, you can now start defining your marketing plan to build brand, identify key positions, drive the sales cycle, and nurture customer relationships. As you flesh out specific strategies and tactics you start applying rough budget estimates to the different elements, and prioritize. As marketers you need to control the agenda for what is to be accomplished, why it is important to bottom-line sales and profit, and how much effort is required. Based on your stewardship the appropriate level of funding can be determined.

Bringing it all together, after going through the above exercise you should now have a fairly accurate representation of goals, market reality, and the effort (ie the budget) required for your marketing program. If you had an original budget number set aside from earlier, pull it out and compare it with your new plan outline and budget. Are the two numbers aligned? If so, you can move forward to the next stage with confidence knowing the budget commitment is in line with the marketing effort. If not, its time to go back and have another conversation with the CEO or President to re-clarify the company’s direction and seek commitment to achieve the stated goals. These may be tough conversations, but senior management buy-in and commitment to the budget are essential. In the market-up reality there is no halfway ticket to Europe. You have to fully commit the resources and funding to get where you want to go.

This entry was posted on Thursday, August 16th, 2007 at 9:00 am and is filed under Marketing, Advertising. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.