“My goal for the year is $2 million in revenue, and I expect a million of that to come from marketing. I have $50,000 to spend.” This statement, at times heard from CEOs in the B2B space, highlights a common disconnect in marketing expectations. The math in those B2B marketing budgets simply doesn’t add up. Why are marketing expectations so inflated, and how can marketers navigate these challenges?
“The ROI on that spend isn’t realistic,” says Jenn Mancusi, CEO and Co-founder of Growgetter, on an episode of “Marketing, Demystified.” “Even when it’s numbers on a page, the math doesn’t math.”
Article sections
- Ideal budget allocations
- Common budgeting mistakes
- Customer marketing
- Reallocating budget for long-term growth
- The role of AI and technology
- Measuring and demonstrating ROI
The ideal budget allocation
Drew Neisser, author of “Renegade Marketing” and founder of CMO Huddles, recommends the following split:
- 10% for Martech
- 30% for staff
- 60% for programs
This distribution allows for a healthy balance between technology, talent, and execution.
“If you’re spending more than 10% on Martech, stop it,” Drew advises.
He notes that many companies overspend on technology at the expense of actual marketing activities. The 30% allocated to staff ensures a strong team to execute strategies, while the bulk of the budget (60%) goes towards programs that directly impact business growth.
This allocation contrasts with what Drew often sees in practice: a 45-45 split between staff and programs, with the remaining 10% going to Martech. This imbalance can limit a company’s marketing reach and effectiveness.
Read next: Laughing All the Way to More Sales: The Importance of Humor in Marketing
Common budgeting mistakes
A common mistake in B2B marketing budgets is the overvaluing of short-term demand generation at the expense of long-term brand building. Drew points out that many marketers focus too heavily on capturing the small percentage of customers who are ready to buy right now, neglecting the larger pool of potential future customers.
“If 90% is focused on what you use the term demand generation, I’ll call it demand capture. That’s a problem because it means you’re not spending much on customer marketing, and you’re not spending any on demand creation,” Drew explains.
Another common mistake is allocating too much of the budget to MarTech solutions without a clear strategy for using them effectively. While marketing technology can be powerful, it’s not a substitute for solid marketing fundamentals and strategic thinking.
Read next: Keeping track of progress: Choosing the right CRM – a chat with Scott Brinker
Investing in customer marketing
Drew emphasizes the importance of allocating budget to customer marketing, which can improve retention rates, increase customer lifetime value, and more referrals.
Drew proposes a thought experiment.
“Imagine the marketer that spent 90% of their marketing dollars on existing customers.”
He suggests this could involve customer advisory boards, awards recognizing best customers, user conferences, and small group dinners that bring potential customers together with existing ones.
The rationale?
“Everything you do for your customers will make getting sales easier,” Drew notes. “But almost nothing you do to try to get sales helps your customers.”
The cost to acquire new revenue from existing clients is typically much lower than the cost to acquire new clients altogether. This makes customer marketing a potentially high-ROI activity that’s often overlooked in B2B marketing budgets.
Read next: Why Cutting Marketing Budget Costs More Than You Save
Reallocating budget for long-term growth
Shifting the budget from short-term lead generation to long-term brand building and reputation management can be challenging, especially when facing pressure for immediate results. However, it’s crucial for sustainable growth.
Build a case for increased investment in brand-building activities over time, based on concrete results rather than theoretical arguments.
When it comes to allocating budget for strategic initiatives, Drew cautions against focusing solely on surface-level brand changes like updating logos or websites. Instead, he advocates for aligning marketing spend with deeper strategic shifts, particularly in product development.
“If you’re going to do a new website and a new logo and a new color and all that good stuff, make sure you’re changing the product too. That’s your litmus test,” Drew advises.
True strategic change involves evolving your product offering, not just your brand’s visual identity. This approach ensures that marketing dollars are supporting substantive business growth rather than just cosmetic changes.
Show me how to create my marketing budget
The role of AI and technology
Don’t over-rely on AI tools, but use them as a “sparring partner,” Drew said. They should not replace human creativity.
“You can workshop all of that stuff with generative AI. And then let’s say you came up and you say, classic example, ROI calculator. And you said, I want to, we don’t have an ROI we need one. Then you go to generative AI and say, I need to build a ROI calculator. What are the 10 steps to do it?”
This approach leverages AI to streamline processes and generate ideas while still relying on human marketers for strategic direction and creative input.
Measuring and demonstrating ROI
Demonstrating ROI is crucial for justifying marketing budgets to leadership. Drew recommends using three buckets of metrics
- brand health
- customer health
- demand generation health
Drew emphasizes the importance of tracking trends rather than absolute numbers. By presenting these metrics as trends over time, marketers can make a stronger case for the effectiveness of their budget allocations and strategies.
Read next: Creating your first marketing budget
Understanding the expectation gap
The disconnect between marketing expectations and realities often stems from a lack of marketing experience among CEOs.
“Less than 20% of CEOs have any experience in marketing,” Drew said. “But if you ask them, ‘Do you know marketing?’ 80% will say, with confidence, ‘I totally understand marketing and how it works.'”
This knowledge gap can lead to unrealistic expectations and a misunderstanding of how marketing actually functions. Drew also notes that CEO hubris can play a role.
“I’m a leader, CEO. I’m an entrepreneur. I figured out how to write this code,” Drew said. “You damn well can figure out how to market it. Just go do it.”
Bridging this gap requires patient education and clear communication from marketers. By consistently demonstrating the value of strategic, long-term marketing investments, B2B marketers can help align expectations with realities.