Rhoan Morgan is the CEO and Co-Founder of DemandLab.
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Absolutely nothing stays the same. But lately, everything seems to be changing all at once. Political, economic, social and environmental forces constantly force us to rethink our approaches to various challenges, including financial and budgetary complexities. With change the only constant, how can marketers best manage budgets? What should we be spending on, and why?
In today’s economy, the average marketing spend has increased from 6.4% of company revenue in 2021 to 9.5% in 2022, but numbers still aren’t what they were between 2018 and 2020, with an average of 10.9%. Yet, despite reduced marketing budgets, expectations for marketing haven’t decreased at a relative pace.
To succeed as a marketer during these times of uncertainty, you’ll have to learn to flex when things are in flux. You’ll need to continuously evaluate your campaign effectiveness and course-correct to meet your goals.
Given this need for increased flexibility, marketing leaders should think about four approaches to get the most from their annual budgets.
Realize it’s okay when things shift.
Marketing budgets are often first to be considered for the chopping block because they’re not usually tied closely enough to revenue (although this is evolving through the use of revenue attribution platforms).
However, marketing is not part of discretionary spending. It’s a critical component of your company. Marketing serves as a brand champion, and your brand is foundational. It forms the basis of everything you do. If you don’t support your brand from top to bottom, you won’t be supporting your customer.
Cutting marketing staff is ill-advised since this team already runs lean, with marketers accustomed to wearing many hats. The nice thing about marketing budgets is they typically have fewer fixed costs than variable. This brings agility, creativity and opportunity.
Rather than downsizing, consider shifting your spending and resource allocation. Harvard Business Review and other researchers have shown that organizations that maintain or increase their marketing budgets during a recession preserve or add market share. Now more than ever, marketers should continually evaluate the effectiveness of their campaigns and channels and feel confident in reporting on ROI.
Understand what you should prioritize.
B2B marketers have so many options available to reach buyers. When contemplating new technologies, for example, it’s tempting to chase the newest shiny objects based on little supporting information. Break through distractions by implementing a structured approach to making the best decisions by analyzing your choices. Many decision models exist—from rational to intuitive, and what to use will be based on your available resources, timeline and how critical the decision is to your business.
An approach I believe that’s good for making big investment decisions, as well as quick in-the-moment choices, is the Purpose Based Alignment Model, a methodology used for years in IT. Niel Nickolaisen, a thought leader in using Agile principles, created the model to help him and his teams make decisions and align their focus, energy and resources to business goals. We like to see this model applied to marketing decision-making because it not only helps marketing with decisioning but also provides a proven methodology to share with other executive teams. The model evaluates activities and gauges their importance from a mission-critical and market-differentiating standpoint based on where they fit in these quadrants:
• Differentiating—High differentiating, high mission-critical: Activities that set you apart in the marketplace and are directly related to your strategic competitive advantage. One example could be part of your customer experience strategy or how you use data in marketing.
• Parity—Low differentiating, high mission-critical: Activities that must be present and maintained to keep market share. When something sits in this quadrant, your goal is to use best practices and keep it simple. An example is regulatory compliance.
• Partner—High market differentiating, low mission-critical: Activities that are important yet low mission-critical. Many of these can be outsourced to a partner or complemented by external expertise. Technology implementations or deployments, audits or content development are all examples that fall in this quadrant.
• Who Cares—Low market differentiating, low mission-critical: Activities with minimal impact that should have limited resources allocated to them or be permanently removed. An example might be a technology unaligned with your company’s needs or something not creating market share or differentiation. Just lose it.
Beware of decision biases that can lead to flawed judgments and suboptimal outcomes, like the halo effect, confirmation bias and availability bias. Addressing biases requires awareness, critical thinking and a willingness to challenge our own preconceptions.
Establish reliable revenue attribution.
No matter where initiatives fall within your matrix, you must prove their value. And that’s only possible with reliable data and systems that allow you to measure it—and make meaningful, thoughtful and accurate decisions based on your learning. It’s vital to understand where you should be investing.
To accurately measure revenue, you first have to quantify it. Make sure your framework is capable of collecting and measuring the channel, source and attribution data throughout the entire customer journey—from first touch point to closed-won revenue. Then you can turn that data into insights that inform your decisions.
Align with the CEO and CFO.
As a marketing leader, you need to prioritize revenue-generating initiatives—developing plans and projects that closely align with the business goals set by your CEO and CFO. But be careful not to cut too close to the bone and sacrifice your brand or competitive edge.
While containing costs is necessary, remaining consistent with your messaging and engagement strategies is also vital. Review objectives often and look at efficiently optimizing your strategies and budget.
Adapt And Flourish
Adjusting budgets needn’t be grueling when you approach the process with skill and adaptability.
Analyze your data, use it to empower your insights, and remain flexible. By doing this, you can maximize marketing’s alignment with business goals, successfully collaborate with leadership, and obtain clear insights into revenue impact.
Think of budgetary twists and turns in the road as opportunities to further prove the value of marketing’s actions—and the future of your spending.
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