One of the questions I got most often as a CMO / Vice President of Marketing was always, “How much should we (a B2B company) spend on marketing?” My answer is easy – “It depends”.
My answer is not a cop out – it actually does depend on your size, margins, company maturity, brand strength, target market, industry and most importantly – your growth expectations. In fact, the average marketing spend varies greatly across the board.
And since my company, N2O Marketing offers outsourced marketing services to various sized companies in a cross section of industries – we have been able to further refine our unique viewpoint. Also there are multiple ways to benchmark or quantify a recommendation and people easily spend hours debating the pros and cons of each. But right or wrong, I have learned to look at it as a percentage (%) of revenue. This is the preferred method for many CEOs & board members– so hence the learned preference.
But a straight forward question deserves a straight forward answer. So here is the range that I have seen for B2B companies.
|Revenue||Avg B2B Marketing Budget|
|Under $5 million||7 – 8%|
|$5–10 million||6 – 7%|
|$10–50 million||5 – 6%|
|$50–100 million||4 – 5%|
|Over $100 million||1 – 3%|
A few caveats, young companies (ie. <10 yrs) will usually spend considerably more than established brands. And software and online companies will spend more than traditional B2B brands. Then there are those that just break the mold and have been rewarded accordingly.
For example, from my estimates Salesforce.com spends 9% of their $700M+ revenue on marketing. In fact, during the dot.com bust – they were spending up to 18%. Now they are a household name.
Another example would be Ariba, I estimate that they spend about 6% of their $350M+ revenue on marketing. In the end, whatever it is that your company decides on – just be consistent. Budget a fixed amount and execute on it each month. Marketing has a snowball effect and takes patience – as long as results can be measured.
I hope this helps answer the question. In the future, I plan to answer questions via this Blog about:
- the differences between B2C and B2B
- how a company should spend their budget
- what works and what does not
- …and whatever else I can think about.
Feel free to submit questions on topics you’re most interested in and we will do our best to provide a concise answer. Good luck and happy marketing, Gregg Groenemann, N2O Marketing, Principal www.n2omarketing.com