Facing 2020 Marketing Budget Challenges

Every year since 2012, Gartner’s annual CMO Spend Survey has tracked marketing budget as a proportion of company revenue. Over the past few years, the story has been one of budget stability, with the average marketing budget hovering around the 11% mark. At the start of 2020, this budget stability was intact, with budgets in the nine major industries tracked by Gartner in North America and Western Europe reporting average marketing budgets of 11% of total company revenue. .

But the budget CMOs started 2020 with will not be the budget they end with.

When we collected the data for this year’s survey in April and May, it was evident that there was significant pressure on budgets. Forty-four percent of respondents said their budgets would be cut, with 11% facing substantial cuts of more than 15%.

Fast forward just two months to mid-July, and a survey of nearly 300 marketing executives found that as the COVID-19 crisis continued to have a profound impact on marketing, the proportion of those surveyed expecting a budget reduction of more than 5% rose to 59%. Disturbingly, the proportion expecting a significant reduction of more than 15% had risen to almost a third of respondents. And the 15% cuts are just the starting data from Gartner surveys of CFOs who believe marketing is firmly in focus for future cuts throughout 2020 and into 2021.

So far, so dark. But, as the old saying goes, there’s no point in crying over spilled milk or a lost budget. If your budget has already been cut, it’s important that you do all you can to protect yourself against further cuts by justifying the value of marketing investments to the business and making the most of the remaining budget you have. In fact, even if your budget hasn’t been cut, these are essential steps to take, minimizing the threat of potential future cuts and maximizing value.

This is the essence of optimizing marketing costs. While the natural response to budget cuts may be to cut line items, Gartner recommends a programmatic approach, which aims to optimize all elements of the marketing operational mix: labor, agencies, technology, and channels. To do this, CMOs must answer three fundamental questions:

1. How do I prove the value of the marketing investments I need to protect?
2. How do I identify the costs that I can afford to reduce?
3. How to optimize marketing costs to generate a better return on investment?

But where to start ? Below are some tips to get you started on your cost optimization program in key areas of marketing spend.

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Internal resources and external agencies

See how marketing capabilities align with strategic goals by mapping current state against desired state capabilities as they extend to your internal teams and external agencies and partners. Also map the capabilities of external agencies by identifying areas of discrete value and areas of overlap with internal resources. Explore each agency’s scope of work, ensuring their projects support current marketing goals. Use this review to pause underperforming programs and consolidate agencies where there is overlap with other agencies or internal resources. Avoid the trap of using the gross measure of cost when assessing the value of agency contributions. Focus on both return on goals and return on investment.

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Marketing Technology

Create a centralized catalog of currently deployed marketing technologies. This should provide an indication of how the martech stack supports customers, the marketing team, partners, and overall business goals such as growth or improved efficiency.

Deconstruct the marketing technology stack by revisiting the use cases and opportunities the technology was meant to address when it was initially deployed. Establish what would happen if the marketing organization decommissions the technology. Ask questions such as: What processes or programs should change if the technology is no longer in place? What data sources come from marketing technology? Test the impact of removing the marketing platform on a single product line or business unit.

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Marketing channels

Map channel investments and execution against evolving customer journeys. Use tools such as RCQ (reach, cost and quality) analysis to test the relevance of channel choices with journeys and responses. Use data and insights to quickly test, monitor, and adjust your tactics. Gain agility by moving to a weekly or bi-weekly media planning cycle.

Avoid the trap of focusing on conversion metrics to optimize performance across all channels and journeys. Map response types to touchpoints, making sure to capture and optimize actions as well as intent and sentiment, as follows:

• Action: They are measurable interactions in response to marketing that can be directly linked to business results.
• Commitment: They are measurable expressions of interest or consideration in response to marketing that cannot be directly linked to business results.
• Perception: These are responses to marketing that can be measured indirectly, often through a survey or social listening.

Optimize for the future

CMOs tend to consider incorporating cost optimization measures only after being asked to cut their budgets. Instead, CMOs need to think more like business leaders and keep the finances of the entire organization in mind. Focus your fiscal efforts on ROI and creating clear business value, and your operation will be better prepared to stay unscathed in times of economic uncertainty.