The dangers of misaligning your marketing budget with your business goals

In today’s competitive and fast-paced marketing environment, controlling marketing spend is becoming a fine art.

by Gartner CMO Expenditure Survey 2015-2016 revealed marketing budgets are actually growing, with a focus on social marketing, analytics, customer experience, and digital commerce. But with that comes heightened expectations, according to the report, as marketing is expected to drive profitable growth through the acquisition, retention and expansion of the most valuable customer relationships.

The challenge for marketers now is how to effectively synchronize budget priorities with measurable business results. We talk to marketing executives, experts and analysts to find out why CMOs are under more pressure than ever to align marketing spend with business goals.

“The biggest budgeting mistake I’ve witnessed throughout my years as a marketer is not tying budgets directly to core business results,” said Scott Anderson, CMO of the Sitecore software company.

“A company, especially in the tech industry, is a living, breathing entity. It’s a dynamic environment where leaders make compromise decisions at all levels.”

When something causes a change in financial planning, such as an economic downturn or a change in market dynamics, business entities that demonstrate a direct benefit to revenue or bottom line have an advantage, Anderson said.

“For marketing managers, or any functional manager for that matter, it’s critical to understand the priorities of key business stakeholders, be able to translate them into measurable results, and then tie your budget to those results. .”

Lack of alignment leads to chase and scramble game

According to Anderson, whenever he has observed companies in a growth cycle, processes, metrics and budget discipline are not monitored as closely as they should be. However, when this cycle turns the other way, those who have not directly tied resources to business results must scramble to protect their priority programs.

“It’s the same thing in the marketing function. A CMO’s priorities can change at any time, without an increase in overall marketing funding. When this is the case, the only way for a CMO to increase funding in one area is to decrease in another,” he says.

“Those marketers without a plan or measurable business accountability are in a weak position when this happens.”

Bonnie Crater, CEO of marketing campaign measurement company Full Circle Insights, agrees with Anderson’s observation. She points out that as a marketer, your budget is always closely tied to how you operate — and that’s something the CMO needs to discuss with the CEO on a regular basis.

“If you go over budget, it can significantly affect business results — and it could be problematic for business goals,” she said. “And if you go over budget and don’t meet your targets, you could be in serious trouble and face very significant budget cuts and layoffs.”

To combat this, Crater suggests that CMOs determine the revenue goal and sales goal for that year, as well as the optimal viable conversion rate, and then adjust the number of leads you need to generate to meet the goals. of income.

“You also need to look at the percentage of leads that come from marketing versus the sales team. Finally, you need to know what your average sales cycle is, as this can change the number of leads needed to generate, depending on the length of the company’s sales cycle,” she said.

Run the risk of becoming a less agile marketer

The global marketing director of marketing automation software company Squiz, Robin Marchant, believes that not aligning the budget with the company’s overall direction and vision spells trouble for marketers.

CMOs will fall into the trap of focusing on building a plan that doesn’t go in the same direction as the business, Marchant says, and risk falling into the trap of appearing to be under budget or not being as nimble as they should be. .

“It’s because you’re funding the wrong thing to drive the company in a slightly different direction,” he said. “That’s where I think a lot of marketers — and a lot of organizations — have this disjointed approach to marketing budgets and business management,” Marchant says.

Marketers must first think about what they actually want to achieve and determine what success really looks like over the overall planning cycle – with quarterly, annual and 3-5 year extended forecasting and budgeting plans , he added.

“I think the key is to be agile when you look at all the planning and budgeting – especially when you look at the marketing terms now – it’s moving very quickly and technology is definitely impacting that approach.

“Ultimately, you need to focus on the business goals – what you’re trying to achieve in marketing, ensuring you have a flexible and agile approach and that your marketing mix stays relevant. .. not a cost center, but a results department.

Focus on what marketing brings to the company

Sitecore’s Scott Anderson points out that marketers need to recognize the value they bring to a business, whether you’re building a brand, driving demand, activating the pitch or any other functional goal – and remember that none of that does not occur in isolation.

“If your goal is to build a brand, research the competitive set, do a brand tracking survey, and then show how you’ve moved the needle over time,” he explained. “Better yet, figure out how the brand equity you build translates into revenue growth. “

Many marketers are still working in a vacuum, Anderson adds. While high creativity commands attention and many clicks indicate momentum, neither links resources to the business outcomes that matter to executives in charge of budget allocation.

Rakuten Marketing Managing Director Anthony Capano agrees. He says marketing should always be considered as a whole, not through individual channels.

“It’s easy to fall into a trap when budgets are segmented by channels and don’t focus on the entire customer journey,” says Capano.

According to Capano, one of the best ways to evaluate marketing budgets is to take a holistic view, looking at marketing channels through the impact they have on the overall consumer experience.

“Marketers need to critically examine which campaigns are actually driving traffic and impacting consumers. Using an attribution model is a great way to do this because it helps marketers understand precisely what drives consumer engagement, sales conversion, and where budget should be prioritized and moved.

“It helps optimize budget and provides greater flexibility for marketers running campaigns across multiple channels,” Capano says.

Top tips for aligning marketing spend with business goals

To better align marketing spend with business goals, Anderson recommends the following steps:

• Interview all relevant company stakeholders
• Consolidate their marketing demands into a consolidated set of tangible metrics
• Tie your budget to these metrics and report back to your stakeholders at least quarterly to demonstrate your accountability.

“And when shifts and changes happen, if you are aligned with key stakeholders and your budget is tied to the outcomes you have agreed with them, you can have a much better conversation about budget allocation levels” , he said.

Learn more about our marketing budget series:

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