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What percentage of revenue should B2B companies spend on marketing and sales?

This is this is the third video in the series, and also a great question, and one that many B2B companies struggle with. Please watch the video below, or you can read the article about this important topic.

If you missed either of the first two video.

Here is the first video; B2B MARKETING & SALES CHALLENGES – FACING TODAY’S REALITY

You can watch the 2nd video here. 5 CLIENT RELATIONSHIP STAGES

Let’s look at the B2B marketing budgets of two of the most successful B2B companies in the past 40+ years.

These two companies are IBM and Microsoft.

First of all, nobody has ever accused either of these two companies of having the best technology, and yet both of them have survived through many recessions, to become two of the most successful companies in history.

They both had technology that was good enough. They both had, and still have, products and services that meet the needs of their current customers and marketplace. Their technology works well enough to meet those needs.

And yet ironically, both have been sued by the US government for predatory and monopolistic business practices.

And when Steve Jobs was alive, Apple also fit into this category. And to this day, they still do, but a few people are predicting Apple’s downfall now too. We’ll have to see.

It’s interesting to note that all of these companies are technology companies, where there has been exponential growth and decline in many other technology companies.

It should also be noted that IBM has gained much of its revenue from services over the past 10 to 15 years. But a lot of that service revenue is helping their clients use technology better.

So, what do these three companies spend on marketing and sales?Marketing and sales budget vs R&D

It was difficult to find what Apple spends on marketing and sales, because all of their internal salaries are put into the same bucket in the financial reporting.

However, IBM and Microsoft split their marketing and sales expenses into one expense item. Both of these companies spend between 21% and 23% of revenue every year on marketing and sales.

Paradoxically, they each spend only about 15% of revenue on Research and Development. This means they spend 50% more of revenue on marketing and sales then they do on R&D. Apple spends about 30% of revenue on marketing, sales and administration expenses, but also about 15% on R&D.

Does your company spend in that ratio on marketing and sales?

So why would three of the most successful technology companies in history spend 50% more on marketing and sales than on R&D.

Because they know that you really don’t have to have the best technology to succeed, you MUST, however, have the best marketing. Steve Jobs was one of the greatest marketers that ever lived.

When I joined IBM Canada in the mid 70’s, they put me, and several hundred other new recruits, through a nine month training program, with about 25 people in each class. They trained us in three basic categories.
1. How computers work.
2. General business knowledge, like finance, operations, etc.
3. Marketing and sales.

And by far, the most time was spent on marketing and sales. How best to sell their products and services, with all kinds of role plays for selling to clients.

Now selling and marketing were quite different back then, but I want you to understand my point. IBM knew that the best way to grow their business was to produce the best marketers and sales people any company could have. And IBM made sure you were, or you didn’t last with the company.

IBM doesn’t train like that any more. I assume because of costs. And I haven’t found any technology companies that train their sales people and marketers at all any more, and haven’t for about the last thirty years. And yet, when technology people hire sales and marketers, they expect these people to be fully trained. What a paradox.

So, what does your company spend on marketing and sales?

You need to be the best marketer in your marketplace to succeed in today’s Internet world. You need to spend at least 15% of your revenues on marketing and sales, and preferably over 20% of revenues to really grow.

If you do not spend at least 15% of revenues on sales, and more on marketing, then your company will have a very difficult time not just growing, but even surviving.

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Ian DaintyKind regards,
Ian Dainty
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3 responses to “What percentage of revenue should B2B companies spend on marketing and sales?”

  1. Masoud Alemo says:

    Hello Ian,
    What about small businesses with limited resources?
    Masoud

    • Ian Dainty says:

      Hi Masoud, thank you for your question. Small businesses need to be spending at least 15% of revenue on marketing if they want to grow. Too many small businesses spend too much on product development and not enough on marketing. Once you have a product, let customers try it, and let them tell you what else it needs, if anything. But this is all part of marketing. Get your product out there, get some sales, and use that money for more marketing and sales efforts.

      Kind regards,
      Ian Dainty

  2. […] I talked about the need to establish a marketing budget for your practice. A reader emailed me a link to an article with a similar theme. The author was speaking about technology companies, not law […]

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