The most common approach to B2B marketing budget setting, taking last year's figure and adjusting it by a percentage, almost always produces the wrong number. It anchors to what was historically spent rather than to what needs to be achieved, and it embeds every assumption and constraint from the previous year without examining whether they still apply.

Here is a more defensible approach, built on commercial logic rather than iteration from an arbitrary starting point.

Why Prior Year Plus Percentage Is a Bad Starting Point

Incrementing last year's budget is a precision answer to the wrong question. The question it answers is: "What did we spend before?" The question it should answer is: "What do we need to spend to achieve this year's revenue objectives?"

These are rarely the same number. Markets shift. Competitors increase spend. The channel mix that worked last year may be more or less efficient this year. New market opportunities may require investment that has no precedent in the prior year budget. Restricting the question to what was historically spent means the budget is always calibrated to what the business used to need, not what it currently needs.

Binet and Field's research on share of voice and market share is instructive here. Their analysis of decades of IPA effectiveness data shows a consistent relationship: brands that allow their share of voice to fall significantly below their share of market experience revenue decline, typically with a lag of 12-18 months. Brands that incrementally adjust prior year budgets in line with revenue may unknowingly be creating this situation, particularly if their competitors are growing spend more aggressively. The revenue consequence does not show up immediately, which makes it easy to underestimate.

The prior year figure is useful as a reference point and a sanity check. It should not be the anchor for the calculation.

The Objectives-First Budget Framework

The most commercially defensible B2B marketing budget starts with the revenue goal and works backwards through the funnel. This approach connects marketing spend to revenue outcomes in a logic that Finance and the board can follow and evaluate.

The calculation works like this: start with the revenue target for the year. If the business needs US$8 million in new revenue from marketing-sourced pipeline, divide by the average deal size to get the number of deals required. Divide by the sales win rate to get the pipeline volume required. That is the pipeline target that marketing is responsible for generating or contributing to.

Work back up the funnel from pipeline: what percentage of your marketing-qualified leads convert to sales-qualified opportunities? That gives you the MQL volume target. What percentage of raw leads convert to MQL? That gives you the total lead volume target. Apply a blended cost-per-lead across your channel mix, and you have your demand generation budget floor.

Add to this the brand investment allocation. Binet and Field recommend allocating 40-60% of B2B marketing budgets to long-term brand-building activity, with the balance going to short-term demand activation. In practice, many B2B organisations allocate significantly less to brand than this evidence suggests is optimal. The ratio should be informed by your stage: earlier-stage businesses with little market awareness need proportionally more brand investment; established businesses with strong category presence can weight more toward activation.

The objectives-first approach also surfaces resource gaps early. If the pipeline math produces a demand generation budget that is two to three times current spend, that is useful information to have in October rather than in January. It creates the basis for a conversation about either increasing the budget or reducing the revenue target to an achievable level given available resources.

How to Use Industry Benchmarks Without Being Trapped by Them

Benchmarks are context, not targets. Gartner's annual CMO Spend Survey consistently shows B2B technology companies spending between 8-12% of revenue on marketing. Professional services firms typically spend less, often 3-6%. Industrial and manufacturing businesses often spend less still. These figures are a starting reference, but the right number for your business depends on factors that no industry average can capture.

The variables that most commonly justify departing from the benchmark in either direction:

Competitive intensity: if your category is experiencing an influx of well-funded competitors growing share of voice aggressively, holding spend at the industry average may produce below-average share of voice. Binet and Field's research shows this creates a documented risk of market share erosion over a 12-24 month horizon. More competitive environments typically require proportionally higher investment to maintain position.

Growth stage: a business aiming to double revenue in three years needs a different spend ratio than one aiming to hold position. Growth requires building mental availability in a broader addressable market, which typically requires disproportionate investment relative to current revenue. Established businesses with strong brand presence can sustain market position at lower spend ratios than new entrants or growth-stage businesses.

Business model: companies with high ACV, long sales cycles, and strong retention economics can justify higher upfront customer acquisition costs because the lifetine value of each customer is high. Companies with low ACV and high churn need to be considerably more efficient in acquisition spending, which usually means lower absolute spend with tighter channel concentration.

The practical approach to benchmarks in a budget conversation: use them as context to establish that your requested budget is not unreasonable, and then use your objectives-first calculation to show what the right number for your specific situation is. "The industry average is X. Our specific revenue objectives, funnel economics, and competitive position suggest we need Y" is a more defensible position than citing the benchmark as justification in isolation.

Building the Case for What You Need (With Evidence That Holds Up to Finance)

The framing that consistently performs best in budget conversations with Finance and the board is: marketing spend as revenue investment, not cost. This is not a linguistic trick. It is a structural shift in how the request is presented and evaluated.

Cost language invites cost management. If marketing spend is presented as a line item to be minimised alongside travel and office costs, it will be evaluated as a cost, and the pressure will be downward. Investment language invites return analysis. If marketing spend is presented as a revenue investment with a documented return logic, the question becomes "is this a good investment?" rather than "can we do this for less?"

The evidence that makes this case most compellingly in Finance conversations comes in two forms. First, the pipeline math: "This budget generates X in pipeline. At our historical win rate, that produces Y in revenue. The ROI on the investment is Z." This is a financial argument in financial language, and it is more difficult to dismiss than "we need this to build awareness."

Second, the risk of underinvestment: Binet and Field's research on the revenue consequences of falling below share of voice parity with competitors is a genuinely useful piece of evidence to bring into budget discussions. Companies that cut marketing spend during downturns or hold it flat while competitors grow spend tend to see market share erosion that takes three to five years to recover. This is not a threat. It is documented commercial history. It reframes the budget conversation from "what is the minimum we need to spend?" to "what is the risk of underinvestment, and are we comfortable with it?"

Model both directions. Show what the budget you are requesting is expected to produce, and show what a reduced budget would likely produce in terms of pipeline shortfall and revenue impact. Finance teams respond well to rigour and to evidence that you have modelled the downside scenario. It demonstrates commercial maturity and makes the investment case substantially more credible.

Ready to Build a Budget That Gets Approved and Delivers Results?

The B2B Marketing track at FP Collectiv covers budget frameworks, the evidence base for marketing investment decisions, and how to make the commercial case for what you need. If you want to walk into your next budget conversation with a defensible number and the evidence to back it, this is where to start.

Explore the B2B Marketing track at FP Collectiv.

Sources

Binet, L. and Field, P. (2013). The Long and the Short of It. IPA. Evidence on the relationship between share of voice, share of market, and long-term revenue outcomes, including the documented consequences of underinvestment relative to competitive share of voice.

Binet, L. and Field, P. (2017). Media in Focus: Marketing Effectiveness in the Digital Era. IPA. Updated evidence on the optimal balance between brand-building and activation investment in B2B and B2C contexts.

Gartner. Annual CMO Spend Survey. Data on marketing budget as a percentage of revenue across industries, company sizes, and growth stages. Used here as context for benchmark comparison. Note: individual business model and competitive context determine the appropriate spend ratio; treat industry averages as a reference range, not a target.

McKinsey and Company. Research on CFO and board decision-making frameworks for investment approval, including the evidence base on how financial framing affects approval rates for marketing budget requests.