Budgets for B2B Marketing

For Marketing Directors, budget meetings can be the low point of the corporate calendar. The marketer may feel at a disadvantage here. By definition, the rules of the budget game are set by finance wizards. The jargon is obscure, the task is time-consuming, and the format may be rigid. Evaluation is detail oriented. Approval is multi-layered and bureaucratic. Now add time pressure to meet deadlines, plus the uncertainty of the outcome. The impact on the Marketer can range from mild discomfort to enormous stress.

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Re-framing the marketing budget discussion

Marketing needs and wants to be perceived as a key contributor to business strategy. How do we get there? Though they are a pain, budget discussions can be a major opportunity. Describing marketing in terms of processes is a good way to show that the team and its activities are aligned to business objectives.

?If you’re going to re-frame the discussion about the marketing budget successfully, you must start with a clear statement about the value Marketing delivers for the company. This mission must be easy to understand. Use short words, no jargon. If necessary, say it in big letters with a thick marker.

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The Marketing mission: to create and optimise processes for winning and retaining profitable customers.

The marketing system is an interlocking value chain

To achieve that mission, marketing manages multiple processes, that run in parallel. Every company takes a different approach, but here are some generic examples.

• Identify prospects at target organisations.
• Gain GDPR compliant permission for marketing from contacts.
• Qualify prospects, leads and opportunities.
• Outbound promotion and lead generation.
• Inbound lead collection and qualification.
• Hand-over of qualified leads to Sales for opportunity qualification.

It should be clear from these examples, that this describes a set of processes, designed to operate in a sequence. It's up to you to make it clear to other managers that you can’t remove one element and expect the chain to function.

An easy-to-understand example is the drive train on a car:

motor > gearbox > drive shaft > differential > wheels.

The marketing system works the same way: it's a complete, interlocking value chain. Sometimes, it's helpful to state the obvious so that you have a common basis for discussion. This is probably one of those times.

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Marketing combines resources

The second part of re-framing the budget discussion is to widen the scope. This is essential because, if you accept the fiction that the marketing budget is “only about the money”, you immediately enter the financial dungeon and have to play according to the dragon’s rules. “Those who can breathe fire will win”. Tip: don’t go there.

Marketing is most definitely not about money alone. To achieve the marketing mission, you use a variety of resources: people, services, technology, data ... and yes, you need money as well. Lots of it. Key point to get across: marketing teams create processes by combining resources.

People

At the top of the list is human beings: and both quantity and quality are important.

The quantity of FTE shown on the HR system is never, ever, what the marketing director actually gets to produce results with. Internal meetings, events and processes bite into the available 220 working days a year. Illness and parental leave can remove key staff for weeks or months at a time. In practice, it’s no surprise if a marketing team is actually running on 80% of nominal FTE headcount.

Quality means skill sets. To keep those up-to-date and relevant for achieving the marketing mission, your staff need blocks of time for professional development.

Since these comments apply to every team in the company, you can’t use them to plead for special treatment. But you should expect finance managers to understand the practical implications of staff absence because of sickness, parental leave or training on your ability to deliver. And that you need cash budget to buy experts.

Services

Simple fact – B2B Marketing teams are more effective when they embrace external services. Especially when they need to hire skills or execute promotions.

External services is how marketing teams get cost-effective access to experts with specialised knowledge. Even better: you can turn the supply of that expertise on or off as required. Whether you outsource an activity to an agency, delegate a task to a freelancer or collaborate on a project with a consultant, in every case the advantage is clear. You only pay for what you actually use.

External services are essential for promotional activities. Most of them can only be implemented in conjunction with external suppliers. Like: participation in events and trade fairs; online promotion via Pay-per-Click; PR and advertising in trade, industry or business publications; sponsorship opportunities.

Technology

IT is as essential to marketing as machinery is to the shop floor, or real estate to the business. Whereas financial systems are typically installed on company premises, the majority of marketing systems are SaaS. That means you have monthly or annual costs. And these are just as much ‘fixed’ as the rent for a building, or the leasing contract for vehicles. These are contracts you cannot – most definitely should not - get out of. Why?

• Because the long-term time and effort of finding an alternative supplier and re-building the process is out of all proportion to the short-term cash advantage.
• Because processes are operated by human beings who would have to completely re-train if the choice of system was interrupted or changed.

Data

Data is a corporate asset. And the most valuable data is a by-product of processes. It takes you a lot of time and effort to build and operate processes, so it makes sense to gather data about how effective they are. Analysis of processes reveals options for innovating and optimising their effectiveness.

Finance professionals especially, should understand this. The company exists to supply customers with products or services in return for money; the finance team documents that process and keeps score. That's why, when finance professionals think of data, they are usually thinking in terms of the data that refers to financial transactions. Things like: quantity of goods, unit price, taxes, shipping costs, total value, invoice number, cash received.

In exactly the same way, the company’s processes for “winning and retaining profitable customers” generate huge amounts of marketing data. Gathering that data, interpreting it and acting on it are the responsibility and function of your marketing team. That activity is essential. It also incurs costs. Cut those costs and the process is no longer fit-for-purpose.

Money

Although many items in a marketing budget are fixed costs, discretionary budget is vital because it provides flexibility. As marketing director, you need discretionary budget so you can shift the balance of resources between processes as circumstances require. The prompt availability of discretionary budget is a key factor in the ability of marketing to respond to change quickly and effectively.?

The budget is where Business Managers allocate funds, indicate why they are needed, what they will be used for. Fine, Marketers understand that. Bucketing is sensible. But it should not become a strait jacket. Especially not for a period as long as an entire year.

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Managing marketing via a closed-loop

Companies are constantly adapting their business objectives to the ongoing evolution of the world around them: the economy, the market. Consequently, processes must change too. Financial managers should understand this. After all, the EU Commission and national governments are constantly tinkering with accounting regulations and standards, and finance departments have to fine-tune their processes in response.

In exactly the same way, your marketing cannot be a set-it-and-forget-it machine. The difference is that, in marketing, the changes are more frequent and the impacts often significantly larger. Sometimes you can adapt to changing customer needs and desires by tweaking or updating the existing process. Frequently, however, the changes - in the market, to the product, the choice of target audience – are so significant that processes must be re-built or designed from scratch.

That’s why most marketing directors manage their processes using a closed-loop approach. Ongoing feedback allows you to monitor running operations and to implement process innovation. By following methods like the PDCA cycle used by manufacturing teams, you can develop hypotheses, test those ideas, and improve upon them in a continuous improvement cycle.

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Monitoring running operations

We’ve already said that “good marketing teams combine resources to create processes”.? Let’s say it in a different way, to ensure clarity in your budget discussions with business and financial managers:

You have to build a process, before you can use it.

Building a process means investing resources

The first stage is to design and build each of the processes in your marketing value chain. Every marketing value chain is unique, built to meet the needs of a specific company. It may well be assembled from standard components, but the result will be a custom process.

This build stage is all up-front time and effort. By all means narrow the scope to the essentials; focus on the must-haves, cut out the extras. But finance managers need to understand that shaving the costs in the build stage will compromise the quality and effectiveness of the finished process.

I was once asked how much of a process could be demonstrated half-way through the project build schedule. My reply: “Nothing. You don’t see 50% of New York just because you’ve flown half-way across the Atlantic. You don't expect 50% of the cake to be ready to eat half-way through the baking time.”

Operations means both fixed and variable costs

The second stage is to actually use the process. There are probably some fixed costs associated with using each process. Think: monthly costs for SaaS software. In addition, however, there will also be the costs that vary according to how intensively you use the process. Think: staff hours; pay per click adverts; square metres of trade show space; days of agency time.

Finance managers looking for ‘savings’ need to understand that not using a process often causes more disruption than the value of the budget saved. This is most definitely not like deciding to park a vehicle, save on the fuel costs and forgo the mileage. Instead, throttling one process in an interlocking series can cause the breakdown of a value chain. When the output of an upstream process is reduced, all downstream processes are starved of input.

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Implementing process innovation

If good marketing teams create processes, then great marketing teams know how to innovate processes to increase their effectiveness. They actively look for new ways to combine resources, to re-invent and to re-design their processes. This is one of the key drivers of your marketing value for the company.

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To increase effectiveness, marketers continually improve processes.

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Measurable marketing processes

As we’ve seen, the marketing mission comprises a series of interlocking processes, each designed to perform a different function. Each therefore generates different outputs. Identification of 'a prospect at a target organisation' is a valid output of marketing work. So are 'gaining a GDPR-compliant opt-in', 'qualifying a contact', 'qualifying a lead'.

So how can a manager measure processes? You can start by comparing inputs vs outputs. But … to the person with a hammer, everything looks like a nail. So, for accountants, there's a huge temptation to reduce everything to currency units. Well, that’s fine if you want to calculate the total costs of the inputs - but is that a good way to explain the breadth of the outputs or the value of marketing?

If your accountant does choose to ‘follow the money’ they'll probably be delighted to hear that, by the end of the Twelfth Day of Christmas, my true love gave to me "a selection of goods and services worth € 21.260 at market prices". (364 gifts: average value = € 58-40.)

Frankly, I think the preference for reducing everything to currency units is nonsense. Not just because the total is based on extremely wobbly value assumptions (such as “Drummer Drumming = € 50 per performance”). But also because, IMO, stating “Drummers Drumming = 12 performances” is a far more effective description of how part of the budget was used. [However: nice try, ChatGPT.]

As noted above, another valid output of marketing processes is data. The company has paid for the data to be collected; it is stored and kept in order to enable downstream processes. Data is therefore a corporate asset. How to set a value on it? By quantity? By level of completeness? By time and effort required to maintain it? All these factors represent resource issues and are therefore part of the marketing budget discussion.

It also makes sense to measure and chart how the combination of outputs has changed compared to the previous year. Whether you believe the current output volumes are sufficient to drive the follow-on process; and whether the downstream team – Sales – is satisfied that the quality of output you handed over matches the Service Level that wyou agreed on at the beginning of the year.

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Investing in innovation generates returns

The sheer volume of change - in the economy, market, in the customers' head – means that marketing processes must constantly be updated to ensure they stay effective. Key argument: manufacturing doesn’t stint on maintenance for manufacturing processes – and neither should marketing.

Some of those changes are obligatory and Marketing cannot ignore an update. For example: new product features mean content updates. This in turn provides the opportunity for a re-launch of a ‘new and improved’ product, which is presented to customers and prospects through all media and channels.

Discretionary improvements, on the other hand, are optional and often initiated by marketing itself. For example: integrating the data flows from the website to the CRM which ensures smoother and faster hand-over of qualified leads from Marketing to Sales.

In both cases, marketing has used its available resources and budget to improve the processes it is responsible for. The impact can be validated with before and after performance indicators. Both examples should - in my view – most definitely to be classified as a ‘return on investment’, no matter how hard it is to quantify in cash terms.

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The strategic, corporate view

There’s an even wider view that you need to keep in mind, as well: how the marketing function fits into the strategic corporate value chain that achieves business objectives. Seen in this context, the sequence is:

Business Development >?Product Management > Marketing > Sales

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• Business Development identifies the target markets which the company should aim for.
• Product Marketing identifies the Pains and Gains of the customer segments and designs the appropriate Solution.
• Collaboration between Product Marketing and Marketing establishes the Value Proposition, the Go-to-Market strategy and the messaging.
• Collaboration between Marketing and Sales establishes the prioritisation of target segments by volume and value; the members of the Buying Committee; the messaging to key Personas; and the criteria of a qualified Lead, ready for hand-over.

With those upstream and downstream elements defined, Marketing can now use its experience and knowledge to Build and Use an interlocking series of processes for winning and retaining profitable customers.

The collaboration by Marketing with Product Marketing and with Sales should also be an ongoing conversation. If you treat these as set-it-and-forget-it, your processes are fixed and rapidly become out-of-date as the world continues to change around you.

Given this ‘business generation’ context, your Marketing team must have sufficient resources to handle the volume of input that can be expected from Product Management; and the volume of output that Sales requires you to deliver to achieve its targets. Both collaborative efforts should also be reflected in the budget, too.

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A stable launch pad for negotiations

Whether or not you use this form of words, or this set of images, a clear description of the marketing function, its role in the bigger corporate picture and the component parts needed to deliver its mission, will form a strong foundation for your budget discussions.

The next article "Proving the Value of Marketing" looks at typical issues and possible responses.

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I'm Andrew from Ansaco Marketing Consulting. For 20 years, marketing directors at leading German companies have relied on my expertise to align strategies, improve processes, and overcome marketing roadblocks.

To discuss the potential for collaboration, just send me a message.