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A Breakdown of How to Set Your Marketing Technology Budget

Guest Author April 13, 2017

Here’s the good news: the rapid expansion of marketing technology (martech) has, in fact, opened up far more opportunities and capabilities for marketers than we’ve ever had previously.

Here’s the bad news: we’ve created entirely new problem sets that now need addressing. These include how to make smart martech purchasing decisions, how to shift organizational responsibilities to give marketing the proper authority over the technology stack, how to build our marketing departments to be tech-enabled (keeping in mind the reality that martech solutions are going to replace some positions entirely), and how to budget appropriately for the technology solutions we use today and the ones we’ll use tomorrow. Let’s focus on this last problem.

“How much money should I really be spending on all this stuff?”

On the one hand, marketing budgets have been steadily increasing as percentage of organizational revenue over the past few years, meaning that, for most organizations, there is more money available to allocate to marketing technology than in years past.

On the other hand, the more solutions and categories of technology there are, the harder it has become to determine what is actually the right mix of solutions for your business.

Unfortunately, there’s no magic bullet or secret formula that works for companies of all sizes and industries; the exact percentage of your marketing budget devoted to marketing technology (and the infrastructure and services required to support it) depends on:

  • Your overall marketing budget;
  • The size and complexity of your marketing, sales and customer service operation (multiple business units or brands require solutions that are sophisticated, expensive and often, redundant);
  • Your particular business objectives and marketing’s role in achieving them.

As more and more marketing technology systems and solutions flood the market, knowing what is and isn’t an appropriate martech budget for your business is going to get more and more challenging.

Industry Benchmarks

Still, it helps to look at benchmarks: according to Gartner’s 2016/2017 CMO Spend Survey, technology (and the infrastructure and services required to support it) now accounts for 27 percent of the average mid-market or enterprise marketing budget.

As you can see, this 27 percent accounts for more than just the cost of the technology itself. Breaking down the marketing technology budget even further, dollars are allocated across the following five categories:

Compare your martech budget to these averages. If you’re spending considerably less than that, perhaps it’s time to consider increasing the percentage of budget allocated to marketing technology. If you’re spending considerably more than that, use this as an opportunity to evaluate your current marketing technology stack and to determine whether there are tools that aren’t being used or ways to create efficiencies in your services and implementation. And remember, at the end of the day, these numbers are just averages and don’t properly account for all of the variables that force certain industries to spend more on martech than others. They’re guidelines, not hard rules to that must be followed.

Building from the Basics

To be relevant in the modern marketing era, there are a few non-negotiable marketing technology systems you must have in place (think CRM, CMS, marketing automation and web analytics). So at a foundational level, every marketing technology budget must account for these basic platforms. Assuming you have a marketing budget that accounts for these systems, the rest of your martech budget becomes a matter of prioritization and testing.

For example, let’s say you have a basic martech stack comprised of a CRM, marketing automation system, and data analytics system to cover lead capturing, lead nurturing and attribution. You might then recognize that while traffic to your site is good, visitors rarely turn into leads. If you know the few leads that do come through often convert, you may decide to purchase conversion rate optimization software to increase monthly product sales by “x percent.”

What to Do When Your Martech Needs Surpass Allocated Budget

Outside of industry benchmarks, your existing martech budget is likely to be the most significant predictor of your future martech budget. While this makes sense, there are going to be times when your martech needs are going to surpass the budget that’s been allocated toward marketing technology.

In these situations, place yourself in the shoes of the sales rep trying to pitch you their product. Determine the best solution for the problem you’re trying to solve or opportunity you’re trying to capitalize on and create a proposal that explains how this solution will benefit your brand, noting specifically how the new system will improve revenue, drive new leads or achieve whatever goal you’ve set in your proposal.

Pro tip: It never hurts to have a backup option in place. Not every proposal gets accepted the first time around, and if technology is truly a critical part of the objective you’re trying to achieve, then you need to be prepared when your preferred course of action gets rejected.

Budgeting for Time

You’re going to run into a few unforeseen issues as you implement new solutions into your martech stack. Even if the sales rep tells you that it will be a smooth process, err on the side of over-budgeting on lost time for the employee responsible for implementing the new piece of technology.

Not only does technical implementation take time, but adding a new piece of technology takes time to be adopted by your team, especially is an existing technology is already being used. Depending on how many people will be affected by the new service, the effort required to get wider buy-in should be properly factored into the cost of technology.

If you’re looking for an example of this pain, look no further than productivity technology implementation. Perhaps you decide to invest in software such as Slack to decrease email send and improve communication, which on the surface, sounds like a pretty straightforward process. But when you have entire departments that rely on Google Hangouts and email for internal communication, there’s real cost and time involved in breaking these habits in order to achieve this new behavior.

Continue to Invest in Promising Growth Experiments

The use of marketing technology is meant to be iterative — you should constantly be evaluating and reevaluating the success and failures of your solutions. Once you’ve implemented a new piece of marketing technology, take the time to ask yourself if it achieved the desired result. If not, why? Was it prioritized, or did you struggle with team buy-in? If it met or exceeded expectations, is there room for more growth? Should you upgrade to the next level? Or drop it altogether?

Not all marketing technologies lend themselves easily to a quantitative return on investment (ROI), but they should be able to be measured by the goal you initially set up in your proposal. If a marketing technology proves successful, consider putting more money into it. If it doesn’t, don’t be afraid to pull money out.

The Key to Building a Modern Marketing Technology Stack

As marketing technology advances, organizations will be measured by how seamlessly they’re able to connect their systems together to create unified experiences for their customers independent of medium or platform. This degree of sophistication isn’t achieved by purchasing every new marketing widget that comes your way.

Look at the industry averages and use them as guidelines. Prioritize the things you need over the nice-to-haves. Set realistic goals for new technology and evaluate the success. If you do these things, you might just make it to the 4 percent of marketers that felt their “marketing stack” was fully integrated.

Image: Businesshands