The Secret You Don’t Want To Tell Your CFO When Your Marketing Budget Gets Cut
New and sophisticated tools are now available to marketers to help prove the value of marketing spend. These tools are all the more valuable in an era of zero-based budgeting and close boardroom scrutiny of marketing ROI.
Marketers are using new and sophisticated tools to prove the business value of their ideas. While everybody realizes that marketing investments are necessary, it is harder to prove the direct benefit for such investments. And, if anything, the recent trends towards Zero-Based Budgeting are making it even more difficult to keep budgets and initiatives moving forward, intact, year over year. If you’re responsible for your organisation’s marketing budget, the chances are you’re well practiced in the art of uncomfortable conversations.
With media channels ever more fragmented and an increasingly uncertain economic climate, marketing budgets remain a popular target for heavy boardroom scrutiny. It’s a difficult job to justify the ‘science and art’ decisions taken by marketing in any given quarter to in organizations where numbers and ratios are compared with creativity, customer engagement and long-term brand consideration. This creates significant pressure for justification and guaranteed ROI from marketing.
Zero-based budgeting assumes that the budget for each year is built from Zero; and each marketing investment must be justified with ROI metrics, by the CMO and their team. It forces department heads and budget owners to rethink their assumptions about what will drive value which in some ways is probably a good thing. However, every line on an empty spreadsheet that you hope to fill with a marketing activity requires you to provide hard evidence for the ROI it promises to drive. Such evidence has traditionally been difficult to come by. Now, though, there are ways to build an irrefutable case for each element of your vision.
In fact, you can, not only mitigate but even secretly thrive against a backdrop of cuts in your organization. Tools to help you measure and optimise your effectiveness are getting more and more sophisticated. So much so that some of the best marketers out there are becoming experts at ‘doing more with less’, reaping the personal recognition and rewards by doing so. Such tools are capable of scientifically proving the relationship between marketing activities and channels as an input and sales as the output.
Clients I’ve spoken to tell me that such tools help them escape tough budgetary conversations entirely unscathed, confident they can show the impact in top-line revenue from reductions to their budgets. More importantly perhaps, the ability to constantly measure and optimise gives them the platform for a robust, evidence-based argument for increased investments in initiatives that provide healthy growth to their company. Sophisticated CMOs are using software to effortlessly run hundreds of simultaneous investment experiments, allowing them to measure the effectiveness of their promotions, messaging and creative across different media channels in different regions. This allows their marketing teams to keep pulling levers and testing hypotheses throughout a campaign.
Consider how this might apply to your next campaign. You may find that for one line of products, one media mix - let’s say one built heavily around TV and radio - is driving the best return on investment. On the same day, a different product relies on a mix of a modest promotional discount, heavily promoted to through a video shown in mobile devices. The more we talk to senior marketers, the more we find that they want to let go of the past where perhaps, there was a level of blind faith in various channels. Or they know, that because of an outdated attribution model, it often looks like SEO performs the best.
Marketers want more insights but crucially - they want actionable insights that they can derive value from rather than data for the sake of more data. If you could find a way of proving, beyond reasonable doubt, what the effect of marketing investments on sales is, would you turn that down? Of course you wouldn’t. Not when it can drive greater understanding of which messages and promotions are truly driving sales or, maybe, greater efficiencies in your various markets.
In 2016, a leading UK telecom company wanted to increase performance while reducing annual advertising budget by £8m. The brand team found a tool that allowed them enough visibility on their output-per-channel to successfully mitigate the impact of the investment changes. By testing all of their advertising channels and understanding the saturation points and scale that can be driven by each of them, for every season of the year, the telecom provider was able to identify which channels would support reductions with minimal sales impact. The reallocation drove efficiencies and had no impact in brick and mortar sales.
These new tools deliver a new generation of marketing leaders with the capability to raise the bar of respect for our discipline throughout our organisations. We’ve got our hands on quicker and more powerful insights into what works and what doesn’t than we’ve ever had before.
So, when your next potentially uncomfortable conversation arises, there’s a good reason not to dread it. Marketing is a vital function of the business, and we have always known the value we drive (even if it’s misunderstood by others). And, now, we have the numerical proof to back up our assertions. Crucially, we also have the tools and wherewithal to keep driving that value in the events that such conversations do result in a reduced resource. Just don’t tell that to the CFO.