How to Use Marketing Budget KPIs for Decision Making
One of the most underrated skills of a marketing leader is the ability to guide decision making based on budget analysis. The most skilled marketers aren’t just those who can identify the best channels for growing customers; they are also the ones who can identify the best channels to avoid.
Key KPIs to track in your marketing budget
Per channel or tactic, you should track the following key performance indicators (KPIs):
- Budget: how much capital you allocate to a specific channel or tactic
- Amount spent: how much capital was spent during a given period
- Remaining amount: the amount of capital you have left to spend during this same period
- Cumulative budget: cumulative total budget across all marketing channels
- Aggregate spend: the total budget spent across all marketing channels
To put it simply, we have developed this easy to use template to help you track your expenses each month.
5 Ways to Use Marketing Budget KPIs to Guide Decision-Making
Now that you know which KPIs to track monthly, here are five areas where you can use those KPIs to guide decision-making.
1. Marketing effectiveness
This is the one KPI you should have on your monitor and know about before pursuing a marketing opportunity. As a marketer, we only have a limited number of dollars to spend and hours per day. How much do you spend on each new lead, opportunity, and customer?
Here are the formulas you should use to measure your effectiveness per channel:
- Cost per lead (CPL) = Marketing spend per channel ÷ New leads generated per channel
- Cost per opportunity = Marketing spend per channel ÷ New opportunities generated per channel.
- Customer acquisition cost (CAC) = Marketing spend per channel ÷ New customers generated per channel
You need to look at each channel to understand how much you’re paying for leads, opportunities, and customers versus another source of leads. As new marketing or advertising opportunities arise, you should use these KPIs as a litmus test for new investments.
Award is the most frequently asked question when measuring marketing effectiveness. Should you give credit to the channel a lead came from or should credit go back to the channel they came from before conversion? There is no right answer to this question, and each analytics platform handles it differently. Depending on the attribution tool you use, choosing a linear or U-shaped attribution model allows you to credit multiple touchpoints throughout your purchase journey.
2. Fiscal pace
Every week you need to know two things: what percentage of the year are you and how much of your quarterly or annual budget have you spent? A common mistake marketers make is over- or under-budgeting. Unless you have real-time access to invoices from each channel, you cannot see why errors are occurring.
Take inventory of every technology, vendor, and advertising or media cost that counts in your budget. At the start of your budget year, plan what percentage of your budget you should use in each month of the year. Marketers must account for seasonal variations, large one-time costs (eg, trade shows), competitive pressures, and staffing considerations when planning budgets.
Do not get 75% of the year and have not spent all your budget. Similarly, don’t spend 99% of your year and leave 25% of your budget on the table.
3. Marketing and financial alignment
Similar to budget throttling, marketers need to be accountable for every invoice and work with finance to ensure their department’s goals are aligned.
This report shows us the overall goals of marketing and finance when working across multiple departments:
The Forrester Report addresses these three activities to bring finance and marketing closer together:
- Make more joint decisions
- View marketing as a growth center rather than a cost center
- Improve the understanding of the organizational objectives of each department
Coming to the table with a clear budget and spending amounts will help you better collaborate with your finance department and make it easier for you to build business cases for future marketing investments.
4. Industry Benchmark Comparisons
Take all industry references (especially here Where here) with a grain of salt. Depending on whether you are a high-growth business or a business in a mature vertical, this will often dictate your marketing budgets.
Your business goals, which should match your marketing objectiveswill dictate the amount of budget you need to be successful.
5. Control supplier technology and costs
How much do you spend on software, agencies, freelancers, writers, designers, or developers? These should be line items in your budget, so you can predict how on track or off track you are when it comes to meeting your budget goals each year.
Budgeting isn’t the most enjoyable job for a marketer, but not having a clear view of your budget KPIs across tactics, channels, and vendors will put you, the job, and goals at risk. of your team.
