How do you determine the right marketing budget? It’s a question that all marketers ask themselves one day. CEOs too. Do you get your head in knots and really don’t know how to calculate your marketing budget? You also stress about defending it? We give you all the keys!
I’ll be honest: I found myself in this situation at the beginning of my career.
When my general manager at the time came to me and asked me to make a marketing budget proposal, I immediately asked myself how I was going to do it.
I did what you do today: I went to Google, typed in “How to calculate my marketing budget” and applied the method I found most effective.
Theoretically, it was great. In practice, it was crap.
If we have so much trouble defining a marketing budget, it’s because we’re not looking at the problem the right way.
We try to determine an efficient marketing budget without knowing where we want to go. And that’s impossible, unless you’re lucky.
To calculate your marketing budget, you must start from your objectives!
The method to calculate your marketing budget
If I continue my anecdote from the introduction, I managed to calculate a marketing budget that seemed relevant with this method found on Google.
I went to see my CEO and presented him with the budget and the strategy that I had in mind. From memory, it was for 80 000 euros for the year.
He was shocked by the amount and said he would study the 20 pages of my document. I never got the marketing budget.
Why do you think that is? Why couldn’t I convince my management?
Because I didn’t talk about return on investment.
To define an effective B2B marketing budget, there is nothing complicated really: you just have to start from your objectives and work your way up.
Step #1 – Define your revenue goal
This is the starting point for defining your marketing budget effectively.
Without having a clear idea of the revenue you want to generate with your marketing strategy, you will not only not be able to define your budget but you will also not be able to generate any return on investment with your marketing strategy.
Of course, your revenue goal must be achievable and time-bound.
Step #2 – Calculate the number of new customers you need to sign
Now that you’ve determined the revenue you’re aiming for with your marketing strategy, you’re in a position to define the number of customers you need to sign to achieve it.
To do this, nothing could be simpler: you divide your objectified revenue by your average basket.
Step #3 – Calculate the number of leads you need to generate
This is where your thought process for calculating your marketing budget will make sense.
If we recap, at this point you know how much revenue and how many customers your marketing strategy should bring in. You start to have a clear idea of the means you will have to put in place to reach these objectives.
To reach your objectives, you need to implement a marketing strategy that will allow you to generate the necessary leads for the sales team.
To determine the number of leads you need to generate for salespeople, you simply take their conversion rate: how many prospects do salespeople need to meet to sign a new customer?
By getting this answer, you can set the number of leads you need to generate.
Step #4 – Determine the number of visitors you need to attract
Ok but how many?
Same mechanics as for the previous point: to define the number of visitors that your marketing strategy must allow you to attract on your website to reach your objective, you just have to start from your visitors / leads conversion rate.
How many contacts do you generate each month from your website? How many visitors do you have? If you do the ratio, you get your conversion rate.
Applying it to the number of leads you need to generate with your marketing strategy, you get the number of visitors you need to get to reach your goals.
Step #5 – Estimate your marketing budget
Now you have all the keys in hand to define your marketing budget.
You know that your marketing budget must allow you to generate a certain number of visitors, leads, customers and therefore revenue.
You therefore have a more or less precise idea of the actions to be taken to achieve these objectives.
A relevant marketing budget is a marketing budget that is between 15 and 25% of the targeted turnover.
Depending on the actions to be taken to reach your objectives, you are able to adjust this range.
Better yet, you have all the elements to convince your general management!
You can define a marketing budget that will allow you to reach a precise turnover and thus present to your management the return on investment envisaged.
The 4 steps to defend your marketing budget
You’ve made up your mind. You’ve got a solid case and you’re ready to go to your manager’s office and ask for a marketing budget.
After all, your campaign project or the new tool you want to buy will allow you to generate quite a few numbers. Your request is more than legitimate.
Yet, you’re feeling a little bit sick to your stomach. What if they say no? Worse: what if he doesn’t take you seriously and uses this marketing budget request to question you?
I understand your fears, I’ve had them and every marketer I know has been there.
But it doesn’t have to be that way. The nerves can go away if you give it your best shot.
In fact, the issue is not to ask for a new budget but to mobilize enough evidence that your CEO will propose you this marketing budget.
We will see how to do this in this article.
But before that, let me tell you a little story that will allow you to answer this question for yourself.
When my CEO wanted to buy my Twitter account!
It made such an impression on me that I remember the scene perfectly: one morning, in my office with a beautiful (and rare) sun beating down on my screen.
As I often do, my CEO comes to see me about something and talks to me about 36 unrelated things. In the course of the discussion, I end up showing him my Twitter account.
At the time, I had 4 or 5000 followers that allowed me to generate a few hundred visits to my website per month and mostly quote requests.
I show him my Google Analytics and the 2 requests I received in the last few days. And then, to my surprise, he asks me his question:
“How much for your Twitter account?”
Convinced by the methodology and its efficiency, my CEO at the time was ready to buy my Twitter account whereas it usually took 100 arguments to unlock a Marketing budget of a few euros…
The reason is actually natural!
With my demonstration, I convinced him of the potential of the tool and he quickly understood the interest for his turnover.
From that day on, the nervousness I had when talking about the marketing budget disappeared. I had the perfect method to convince him to invest, without stress
And this method, here it is!
Step #1 – Be constantly on the lookout
For me, this is the first quality of an effective marketer.
The world is moving so fast – behaviors, uses, platforms… – that it is essential to stay informed to stay effective.
But besides that, your monitoring is an important ally to justify your marketing budget.
With this watch, you will discover very relevant studies to convince your CEO.
For example, the list of statistics to know by Hubspot or the barometer of Inbound Marketing by Plezi will give you a whole bunch of quantified arguments.
Step #2 – Benchmark your competitors
I see it in the field all the time: the best argument to convince a GM to take action is to tell him about the competitors.
Either by explaining to him that the competitors are doing something you’re not doing and it’s working for them.
Or by selling the fact that your competitors are not yet doing what you are offering and that you can therefore be one step ahead.
The natural ego of the manager will do the rest and convince him to give you your marketing budget.
There are many tools that allow you to analyze your competitors’ websites and compare their performance with yours.
In fact, I propose a free tool to analyze the SEO of your website and compare it with your competitors
Step #3 – Make regular reports, real ones!
A good reporting is not an Excel table that simply shows the evolution of your KPIs.
Numbers are nice but you can make them say anything and everything.
A good marketing report is a report that presents conclusions and recommendations to be more efficient.
If you regularly provide your CEO with relevant reports, you will gradually educate him or her and convince him or her to invest the necessary time without pressure.
Let’s imagine that you regularly report to your CEO on the conversion rate of web contacts into customers.
You tell him every month that in order to convert more often – and therefore earn more money – you should be able to do lead nurturing.
When you arrive at the end of the year to defend your Marketing budget containing a 30,000 euro line for a Marketing Automation software offering this functionality, it will be immediately easier right?
Step #4 – Experiment (if possible!)
If we go back to my story, my CEO wanted to buy my Twitter account from me because he saw the potential very concretely.
The decision is immediately easier for him when there are results, however small.
To defend your marketing budget with serenity, rely on concrete experiments.
Let’s imagine that you want to invest in a Marketing Automation tool to do Lead Nurturing, to continue on the example of the previous step.
Nothing prevents you from testing the approach manually by sending quality emails to a few qualified leads that are not yet mature enough to talk to a salesperson.
This test will allow you to get some key figures.
And if you manage to show your CEO that this one-off test has enabled you to improve your conversion rate by 20 points and that it has generated a few hundred euros in sales, you will have no trouble convincing him to invest in industrializing the approach, don’t you think?