Are You Spending Too Much On Marketing Services?

Spending on marketing is part of doing business, and an increasing reality for many business-to-business companies. But how much is enough? Or even, how much is the right amount?  To give you an idea, here are some benchmarks on what B2B companies spend on marketing, plus a few considerations for how much your business should consider spending on marketing services:

• Tech and software companies often spend 15 percent or more of target revenues on marketing
  
  
• B2B companies typically spend 1 to 5 percent of their target gross revenues on marketing services. Those companies with tighter margins (like distributors or those in low-growth markets) usually spend at the lower end.
  
  
• Companies who are just starting out or have not done any marketing in the past can expect to spend more than those who already have an established marketing function. This is because they will incur start-up fees and initial costs, such as designing a logo, collateral, creating a search-optimized website, hiring new people and building plans, etc.
  
  
• Smaller companies will usually spend more as a percentage of target revenues than larger companies. For example, for companies with sales of $5 million or less, 1 percent amounts to $50,000, which is a lean budget – especially if there’s been no marketing in the past. They may need to invest 2 – 4% (or more) in the first year in order to get their marketing going.  
   
• B2B companies that are launching a new product spend about 5 percent of their Year Five revenues for their launch and year one marketing. For example, if the company is launching a new product that it hopes will achieve $10M in revenue by year 5, the product launch and year one budget should be around $500,000.  

• A company’s positioning affects its budget. For companies that position as luxury or premium brands, a higher proportional marketing budget is usually appropriate.

The amount of money that different B2B companies invest in marketing varies widely. I’ve seen companies invest as little as .15% of their target revenues on marketing, and reap tremendous success.  And I’ve seen companies spend 15% and not get solid results.

Ultimately, it’s important to have B2B marketing benchmarks, but it isn’t the amount or even the percentage that matters – it’s whether the business is spending the right amount to generate the results it seeks and maximize its returns.  If a business spends a dollar on marketing and generates two dollars of profit in return, that company should spend more on marketing.  Conversely, if a company spends $10 on marketing and can't identify what returns its getting, it might need to rethink its investment.  

The essential starting point is knowing how much your company is spending on marketing. That sounds basic, but I've met relatively few companies who knew the answer. Once you know how much you're spending on marketing (in both time and money), you can go on to the second part of the equation, which is to calculate the returns you're getting from marketing. 

And many companies underestimate how tough it is to quantify the many different results that marketing brings – from lead generation to market awareness to sales support and customer loyalty.

If you want to know if you're spending the right amount on marketing services, start by putting the systems in place to help you measure the inputs and the outputs from your marketing efforts.  Marketing automation systems and CRM systems are powerful tools to help you here.   

Thinking about outsourcing your marketing?  Find out why other companies make the choice.