How to Justify Your B2B Budget. 2005 Qtr 1
You think the marketing budget is too low. They think it’s too high. Now what?
Reframe the discussion.
| Are you a Type A or a Type B marketer? | |
| A. | Lower your price. |
| B. | Increase your value. |
| A. | Take costs out of products. |
| B. | Invest in new products and in making products better. |
| A. | “Optimize” distribution to streamline your operations. |
| B. | Make it easier for end users to get your products/services. |
| A. | Reduce headcount through automated customer service. |
| B. | Add the people required to deal with customers person-to-person. |
| A. | Reduce advertising and communications budgets. |
| B. | Communicate often, create a dialogue. |
When management says “the marketing budget,” they’re usually thinking about the portion of the spending that covers advertising, promotions and so forth — the visible, but difficult–to–measure things.
Rather than get defensive and try to justify the investment by “counting leads” or brand leadership studies, direct the discussion back to your products or services: how do you connect with your customers and prospects? Is it just the sales force, or are there other, important touchpoints that contribute to the success of the business?
The challenge is that in today’s world, management is looking for ways to demonstrate a solid return on investment. If they invest in new equipment or new technologies, they can measure increased production throughput or faster document processing. But marketing is different because its activities largely live outside of your company. By design, marketing activities are meant to be customer–focused activities, and cannot easily be measured against internal processes, which are under the company’s direct control.
Plus, in business–to–business marketing, the sell cycles are often measured in months (and even years for some capital equipment). Pretty difficult to say the ad that ran in a magazine this month resulted in a huge equipment or software order a year or two in the future.
So what can we do? Here are two examples of documenting marketing effectiveness without having to get defensive:
- One client, when asked to justify its marketing expenditures, put together a very simple and direct presentation with just seven charts. They documented the growth of their business unit over the past seven years (a growth rate of more than 30% a year), and compared it with the number of sales representatives (virtually unchanged).
Then, they compared their sales to the top 25 customers/prospects, and found that they had made great inroads in both market share and the percentage of the top 25 that they were currently doing business with. Finally, they compared the growth of the investment in strategic marketing initiatives, specifically advertising, trade events and sponsorships. Each year, their budget had grown. In fact, they documented that they outspent all of their competitors, giving them a dominant share of voice in the marketplace!
Oh, and the marketing budget for these activities? Less than one percent of sales. - Based on some market research (a brand touchpoint), an office furniture company realized it had a reputation for “poor quality” and stodgy designs. Further analysis of the research revealed that the poor quality rating was tied directly to the firm’s poor record for timely delivery. And the stodgy design problem was really more an issue about the colors and fabric selection.
The recommendation was to do the following three things: focus and fix the on–time delivery problem, find more contemporary fabrics, and revamp the literature to deliver the new, energized story to designers and facilities managers.
The results: in 18 months the company doubled its sales. The point is that the investment in external communications must work in tandem with internal process efficiencies. Working together, it is safe to say that the huge leap in sales is attributable to the combination of three factors.
Based on the above examples it should be obvious that it takes a concerted effort to succeed in B2B. Marketing can’t do it alone. But without the investment in marketing communications where do you think the two companies above would be in terms of business growth?
Left unattended, customers and prospects are likely to wander off in other directions in search of solutions to their evolving needs. Brand marketers have an obligation to stay in front of their audience in meaningful ways, facilitating a continuing dialogue.
Remember, customers have a choice. And they operate outside of your direct sphere of control. Marketing is an investment in making sure your company is promising and delivering customer satisfaction.
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