Evaluating Marketing Performance

by Jason Ogden | Mar 19, 2024

Marketing budgets and performance go hand in hand and are two of the most fluid things you will find inside any business. Typically, B2B companies spend somewhere in the range of 6-10% of revenue on marketing. However, the percentage of revenue is more of an indicator than a budgeting methodology. For example, if you are on the low end of that range, you can expect lower growth; if you’re on the higher end (or above), you’re probably actively seeking growth. By their nature, early-stage, high-growth smaller companies may operate well outside those ranges.  

Given the deep connection between marketing budgets and performance, here are three things to consider as you evaluate both:

1. Customer Lifetime Value

There are several reasons to review your LTV in this context. First, it informs your customer acquisition cost, specifically the upper limits of how much you’re willing to spend for a new customer. But it also informs opportunities to grow revenue from your existing client base.   How might you spend to improve the delivery or quality of your services to increase client retention? How might you invest in success and sales teams to increase cross-selling, upselling and rebuying?

2. What are you investing in?

Marketing budgets can be synonymous with leads and current-year revenue. Obviously, that’s critical but that’s not the entire picture. You can also invest in things that can transform your business. For example, doing things to access new markets, improving client retention and revenue expansion.  Those objectives may or may not generate additional revenue in the current budget year. 

Second, you could invest in efficiency. For example, you could invest in lowering your acquisition cost of a new customer. Or you could invest in the productivity of your revenue teams which could result in increased conversion rates, shorter sales cycles, increased prospect numbers, and so on. 

Thirdly, you could invest in longer-term strategies that are unlikely to generate year-one revenue. Such investments include brand, CRM, PR, or market reputation efforts. First-wave awareness efforts to start the process of generating future opportunities within existing or new markets.  

3. Less is more, but not forever. 

In B2B marketing, the name of the game since early 2022 is, How can I do more with less?  There has been a prioritization around efficiencies, cost control, investing in the most productive go-to-market motions, etc. Those are the staples of lean market environments and can make revenue teams more efficient going forward. Efficiency gains have limits and at some point, you will realize diminishing returns. Flat YoY marketing budgets will result in flat revenue production.  

Budgets and performance are fluid.  Whether you’re over or under-achieving your goals, here are some questions you might want to ask yourself:  

• How could you invest to lower your customer acquisition cost?
• Would you increase the budget if you thought this was attainable?
• Are you investing in customer LTV through better service or improved cross-selling efforts?
• Are increases in LTV reflected in increased budgets?
• What are you doing to invest beyond generating current-year opportunities?
• What types of objectives would be worth investing in now for future games?