How much should B2B companies invest in digital marketing?

It is not hard to find information regarding digital marketing budgets. Many papers and articles discuss what percentage of your overall marketing budget should be devoted to digital and, as you might expect, opinions vary greatly.

Most of the published data is oriented toward consumer-oriented businesses. In this article, I will provide a framework to help B2B marketers determine their optimal spend on digital.

The big picture

The clear trend is that digital marketing continues to grow as a percentage of overall marketing spend. In fact, eMarketer predicts that digital will account for nearly 45 percent of media ad spend by 2020:

As companies continue to expand their digital marketing programs, here’s a breakdown of specifically where they plan to increase their investment:

As you can see, search advertising, mobile and social marketing top the list for growth initiatives in 2016.

Mobile is accelerating

It cannot be overstated how much mobile will continue to grow and eventually dominate as the primary digital interface we use. The most recent CMO Survey predicts that marketing spend on mobile will increase by 118 percent in three years, in response to usage trends.

Based on feedback from our B2B clients and information we receive as a Google Premier Partner, I would not be surprised if these mobile numbers are actually conservative.

B2B marketers must understand the role mobile currently plays and how it is trending. It may not be your biggest source of website traffic today, but it is likely your fastest-growing segment and needs to be your focus for the future.

Guidelines for B2B digital marketing budgets

Not surprisingly, B2B marketing spend is all over the map and varies depending on whether the business is product-focused or service-focused:

On average, according to the CMO Survey, it looks like B2B firms spend 6 to 9 percent of company revenues on marketing, with service-oriented businesses being at the lower end and product-oriented businesses being at the higher end of that scale.

Determining your B2B digital marketing budget

As the CEO of a B2B digital marketing agency with over 17 years’ experience, I often get asked, “How much should I invest in digital marketing?” Of course, there’s no single answer — it all depends on your business.

The first step in answering this critical question is to determine what role digital should play in your marketing mix. The answer will likely vary based on the type of product you sell and how complex your sales cycle is. Here are a few examples.

Complex sales cycle

For example, we work with many SaaS (software as a service) firms. These companies generally have long, complex sales cycles. This is typically a high-cost investment and a high-consideration purchase/partnership.

We have seen various spending models work in this situation, with companies spending anywhere from 15 to 100 percent of their marketing budget on digital. I’d have to say that a reasonable average is 25 to 50 percent of total marketing investment spent on digital. To do some easy math, assuming a SaaS company with $50 million in annual revenue:

• $50M in annual revenues
• 8 percent of revenues invested in marketing
• 25 to 50 percent of marketing budget focused on digital
• $50M x .08 x (.25-.50) = $1–$2M annually invested in digital marketing

B2B ecommerce

Let’s say you have a simpler, more standardized product that can be purchased online, such as an expensive replacement part for equipment, a server or storage array. In this case, digital will likely play a larger role in your overall marketing mix. This could put you in the 35 to 75 percent range for digital marketing spend. Let’s look at a reasonable digital marketing budget for the same size B2B ecommerce company:

• $50M in annual revenues
• 8 percent of revenues invested in marketing
• 35 to 70 percent of marketing budget focused on digital
• $50M x .08 x (.35-.75) = $1.4–$3M annual digital marketing budget

Common challenges

Based on our experience leading digital marketing programs for B2B companies, the biggest issue we struggle with in achieving ROI is insufficient resources. Typically, this stems from the following two challenges:

1. Company does not dedicate enough staff to digital marketing. This results in timelines not being met and recommendations not being implemented in a timely manner.
2. Company does not allocate enough budget to digital marketing. This results in not being able to collect and analyze a sufficient amount of data to draw meaningful conclusions about results and ROI.

Conclusion

We know that digital marketing continues to grow. B2B marketers are shifting funds from traditional channels into digital. In order to determine your optimal budget, determine how your customers’ digital experience fits into your overall marketing plan, assess the complexity of your sales cycle, and ensure you are investing adequate funds to properly assess results.

Don’t ignore the substantial and continual growth of mobile, and use these B2B budget ranges as a starting point for your successful digital marketing program.