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In making marketing spend projections, some analysts think the glass is half full, some think the glass is half empty, and a few think the glass is 50 percent too large. But in most years, trends, economic fluctuations and momentum lead to a consensus on what lies ahead.

But 2020 has not been “most years” — and 2021 looks like it will bring its own special brand of uncertainty. Consider that B2B companies will be operating among what feels like unprecedented uncertainty: the confluence of a global pandemic that may or may not persist deeply into next year; remnants of a downturn of unknown size and intensity; muddled employment projections; and fluctuating demand in many industries.

All of which makes the pace of recovery a dark crystal ball.

In 2020, some companies took the challenges head on and increased budgets, which allowed them to build their brands further and capitalize on unforeseen opportunities. Others slashed budgets, headcounts and production. Other businesses turned off the marketing spigot completely, with hopes of reviving their market presence and demand generation activities once the coast cleared. Across the board, traditional media and event spending declined drastically — essential metrics in prognosticating overall B2B marketing spend moving forward.

Read through the litany of online projections and you’ll find quite a few different outlooks for 2021, with one exception: B2B marketing spend will cascade heavily into digital channels. Will overall spend increase? That’s anyone’s guess, but we think it’s unlikely.

Zooming in on what experts expect can help you to see how your spending and budgeting compares with your B2B peers … who are likely moving in the same general direction. Let’s take a look at what they’re saying.

CMOs Emerging From Survival Mode Will Shift to Digital Mode

The Gartner Group’s annual survey of CMOs in the U.S. and England shows that 73 percent of CMOs expect their marketing spend to increase in 2021 (or 2022), depending on the longer- term impact of the pandemic and overall business recovery. This is not growth, however; this is deferred investments in canceled or delayed campaign launches, reduced use of marketing vendors and frozen long-term projects: a slow return to 2020 spending levels. And 69 percent of B2B CMO respondents see one revival ahead: a major increase in media spending, particularly on digital advertising and paid search. However, the biggest leap upward in B2B marketing spend in 2021 will be aimed at marketing technologies, where 68 percent of CMOs expect to increase their outlays, particularly in the area of customer retention. Gartner respondents took a more pessimistic view on marketing headcount.

A recent study by eMarketer underscores the substantial shift to digital advertising. The company forecasts that U.S. B2B companies will spend $8.14 billion on digital ads this year, an increase of 22.6 percent from 2019. Even in a downturn, the growth rate of digital advertising in 2020 has remained consistent with B2B digital ad growth since 2016, which on average has increased by about 25 percent annually. eMarketer points out that the strong increase in 2020 ad spending is the result of the unique conditions that drove B2B marketers to rapidly shift spending from in-person events and other traditional marketing areas. With in-person events still at risk in 2021, expect continued double-digit growth in this area.

And what about content marketing? You’ll see money moving in that direction as well. A total of 43 percent of U.S. B2B marketers surveyed by B2B Marketing Zone said they would reallocate live event budgets to content creation in 2020. With the event marketing space looking dire for at least the first half of 2021, expect this shift to continue.

Marketing Importance up, Spending Likely Down

Deloitte published a special edition of its CMO forecast for 2021, and the respondents painted a picture that presented signs of optimism tempered by deep worries. Overall, B2B CMOs are feeling pretty good about themselves and their organizations, with 58 percent saying the importance of marketing has increased during the pandemic. They also feel better about their own companies’ performance prospects than the economy at large.

Which leads us to budgets. Even though overall organizational budgets and revenues dropped 12.6 percent, marketing budgets rose to the highest percentage of budgets and revenues in the survey’s history (11.4 percent). But be careful with this number: it is less a reflection of enthusiastic marketing than of a precipitous decline in company revenues.

The CMOs in the Deloitte survey have a dimmer view of marketing spend for 2021: without predicting the size of the drop, they expect overall marketing spend to remain down throughout 2021, despite a sharp (70 to 74 percent) increase in spending on mobile and social media marketing. The good news is that CMOs expect cuts to be temporary in nature. Ewan McIntyre, V.P. analyst at Gartner for Marketers, noted that 59 percent of CMOs think their budget cuts will be temporary and bounce back in 2021. He also noted that budget cuts, while significant, have not been as widespread as anticipated. Just under half of CMOs had their budgets cut by more than 5 percent. Taken as a whole, it appears most feel there is strong potential for “business as usual” to return in 2021.

How Marketing Budgets Are Determined

I’ve written about this before, but I think it’s important to provide a refresher on how different organizations develop their marketing budgets. Perhaps this will help you as you build yours for 2021.

A lot of businesses determine their marketing budgets based on projected sales using the Marketing Budget Ratio (MBR) formula. To determine your MBR, divide your marketing investment by your total revenue, which is expressed as a percentage of gross sales. Using this formula, you’ll find many companies spend up to 10 percent of their gross revenue on marketing, especially in B2C. B2B companies are usually more conservative, but not in all cases. MBRs differ greatly by industry, mostly in terms of percentage and how they are calculated. Total marketing spend can include or exclude any of the following:

  • Outside spend with agencies, exhibition companies or other external resources
  • Internal marketing resources (some even include sales)
  • Technology platforms
  • Research
  • Industry memberships
  • Training

In our experience, most companies include direct, outside spend and internal marketing resources in their calculations. When making your own calculations and comparisons, you can lean in that direction when making comparisons. Here are some other numbers you might find helpful:

  • Our own experience indicates mature B2B manufacturing, industrial, construction and engineering companies usually allow 0.5 to 2 percent of revenue for marketing. Start-ups and fast-growth market entrants are more aggressive, some allocating as much as 5 percent.
  • The Gartner CMO Spend Survey from 2017–18 found that manufacturers’ marketing spend averaged 11.3 percent of revenue. The 2019 Gartner CMO spend survey reported B2B manufacturers came in just under 9 percent.

These variations in percentages can be attributed to the vast differences in terms of how the “numerator” in the MBR formula is compiled. So consider these figures as guides, with careful attention paid to the differences in how numbers are calculated.

Using an MBR approach to developing your marketing budget is fine, provided you’re still accounting for and aligning resources with business strategy. A same ol’, same ol’ approach to percentages and allocations is still too prominent among many B2B companies. Make sure you build your plans from the ground up each year — especially in 2021, when so much of the landscape has changed.

Picking a percentage and developing arbitrary allocations without accounting for your real needs is not only bad for business, but it can also leave you under- or over-funded.

Keep Your Eye on the Big Picture

As you’re creating your marketing budget, don’t just look at current-versus-prior year comparisons. Examine market drivers, trends and environmental changes that have taken place. Prioritize your plan to focus on those initiatives that deliver value to the business.

And if you’re looking for help, you know where to find us.