The "Reverse ROI" approach to your marketing budget
by Charlene Gervais
A common question we get is “how do I establish the right marketing budget?” If that sounds like you, you’re not alone.
For some business owners and their teams, marketing is a scary word they try not to think about. But for B2B companies that want to connect with the right audience and grow, marketing is a necessity. Plus, it’s fun. Really.
But one of the trickiest things about B2B marketing comes right at the beginning: setting a marketing budget that make sense for your business. A common question we get from prospects new to marketing is “how do I establish the right budget?” If that sounds like you, you’re not alone.
A budget is a plan for how you’ll spend money, and all good plans start with goals. Ideally, your goals should be SMART and defined quarterly, annually, and three years out. Don’t limit this exercise to what you consider to be marketing goals—open it up to take a big picture view of your business goals. And so we’re working within the realm of reality, set goals you can reasonably expect to achieve between your normal operations and new marketing efforts; this is not where you put your pie-in-the-sky BHAG.
You’ll naturally start to think about strategies at this point. Good. For example, if your goal is organic growth in your existing accounts, that could be achieved through marketing (campaign to promote a new offering to existing customers), sales (new hire to support your reps) or organizational restructure (adding a non-sales account management function). The earlier in the budgeting process you figure out these strategies, the better.
Think like an investor.
When you make a capital investment, you probably think in terms of ROI. Think of marketing the same way. Once you’ve quantified your goals, take a “reverse ROI” approach by determining what you need (and are willing to) spend to hit them.
Accept that some activities can quickly pay dividends (like an Adwords campaign), while others are long-term investments (like a website overhaul or updated brand or messaging strategy). Don’t shortchange one for the other.
Once you’ve quantified your goals, take a “reverse ROI” approach by determining what you need (and are willing to) spend to hit them.
Make it a team sport.
A top-down budget created in a silo misses the fuller picture and unique insights that come when the leadership team works together. Align and include your team on developing business goals, establishing where accountability lies, and plotting the best ways to meet those goals. These discussions will lead to a better business plan and more accurate budgets, and will go a long way as you start to shape your marketing strategy.
Get a bead on costs.
Take inventory of your past, current and planned marketing activities; analyze how your current methods are performing, and make sure to include activities at every stage in the funnel (this article about calculating Marketing ROI isn’t recent, but still relevant).
Will you fund these same activities in the future, or develop new, more effective strategies? This part often trips people up—if you don’t yet have ideas for improving your marketing, that’s OK for now. Earmark funds using your investor mindset, then get help from an agency or outside consultant (or consider a new hire) as you build your marketing plan.
Don't sweat the competition.
You may notice that none of these tips involves stalking the competition, using industry benchmarks or relying on an arbitrary “percentage of revenue.” That’s because your budget should be highly specific to your business and based on your goals. If you’re well positioned and perform on your brand promise, the competition fades away as you connect with exactly the market you are uniquely qualified to serve.
Your budget should be highly specific to your business and based on your goals.
Setting a marketing budget is challenging the first time you do it. Give it a try, measure performance regularly and adjust as needed—nobody nails it the first time, but it gets easier and more accurate every time.