If used well, budgeting is a wonderful thing to help marketers identify and optimize what actually works well. Effective marketing can return five times on the dollar spent, according to McKinsey Associates. However, you don’t get that kind of return on marketing investment (ROMI) unless you invest in the marketing opportunities that return the most value. You need sound facts, not haphazard guesses, to make the right choices. Even last year’s results will be out of date by Q2 in our rapidly moving marketplace. An effective budgeting process will give you those fact-based insights.
But if it’s so helpful, then why is budgeting so dreaded and undervalued? I think it’s because few organizations do it with the intent to optimize programs, rather than just to track financials. Some of the budgeting struggles we see are common to marketing organizations of all sizes:
- Beauty Wins. Product and brand managers parade their wares and management allocates based on the impact of the presentation, not the quality of the opportunity.
- Locks. Planned activities like product launches end up getting a disproportionate share of the funding, just because they are known events. We are fans of planning and product launches are important. However, this imbalance also risks lack of flexibility in spending.
- Floaters. The complement to “Locks,” these activities are disconnected, and done because they perhaps seemed like a good idea at the time or, even worse, have “always been done.”
- Sales Wins. Allocating marketing only where sales are robust will result in missed emerging opportunities.
- Inertia. Last year’s budget gets duplicated. Usually the “go-to habit” when things get very complex and there are competing demands from the CMO.
- Marketing Mix. A single or last-touch allocation model will miss the impact of channels and investments that reach buyers early in the lifecycle or research phase.
Is any of that happening in your own organization? The risk is real: Marketing misalignment and a lack of integration will destroy company value. The marketing department will be hard-pressed to contribute to the organization if work is ad hoc and uncoordinated.
Effective tools for budgeting are not always the priority they need to be. You can avoid these mistakes by taking the budget off the shelf (or out of that rarely opened intranet folder) and track response to activities as they happen, with a continuous cycle of feedback and analysis that will tie results to spending. Be flexible and adjust as results come in.
Marketers must connect strategy with operations, or risk burning through resources while producing only inefficient, ineffective campaigns. No matter what your budget, no one wants to have to explain to the CMO why an investment was never sound in the first place, or was not caught and corrected quickly enough.
One way to avoid this is to ensure that your marketing objectives – and thus the strategies that you fund – are clearly defined. “Increase brand awareness” is not measurable enough in today’s digital marketplace, where customers have many tools and resources that are not connected to your branded properties. To state the obvious, when objectives are measurable and trackable, then strategies can be effectively tracked back. This gives you enormous negotiating power with media and technology vendors, and makes sure that you know what you are buying each quarter.
Of course, this is really hard to do if you are still managing budgets and marketing plans with Excel spreadsheets. A better way is to adopt a Marketing Resource Management (MRM) tool for budgeting, planning (calendar), and workflow. Gartner defines MRM as, “A set of processes and capabilities designed to enhance a company’s ability to orchestrate and optimize internal and external marketing resources.”
If you are still using Excel, start with easy-to-use and implement tools for a single brand or business line, and then advance to more sophisticated and company-wide insights. If you are already using automation tools, make sure they are connecting objectives and strategies and utilized across the entire marketing operation.
Today’s multi-platform, multi-channel marketing campaigns are incredibly complex, and it’s easy to lose sight of how well your team is functioning. Your marketers need constant visibility to fully understand the initiatives underway, the amount of spend committed to these efforts, the deadlines, and budgetary goals. Won’t it be great to go to a staff meeting and really know – with facts, not guesses – what is truly working?
Please comment below if you have faced some of these budgeting challenges, or figured out ways to use budgeting more strategically.
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