fish peeking out from hiding spot in sand
PHOTO: Vlad Tchompalov

We all have those moments in our careers that we remember forever. One of mine is a brief conversation that happened post-Labor Day 25 years ago. As I was sitting at my desk wondering how I was going to get everything finished by the end of the year, a colleague walked by and said, “It’s that time of year when everyone panics when they realize there are only three months left to accomplish their objectives for the year.” 

I hear his voice in my head every Labor Day. 

The truth is for most of us, the panic is exacerbated by the planning and budgeting demands for the next calendar year. If you are a parent, back-to-school and all that entails adds to the stress. I still don’t know why you have to fill out the same forms with the same information, every single year, for each child — how has this not been automated?

Related Article: The Art and Science of Planning a Marketing Budget

3 Areas to Focus Your Budget and Plans for the Year Ahead

I can’t help you with back-to-school or the impact of procrastination on annual objectives, but I can offer some advice for minimizing the stress around budgeting and planning for the coming year. Focus on three things:

  1. Objectives
  2. Optimizing the baseline
  3. Measurement

revenue

Objectives: Revenue and CLTV

As marketers, our core responsibility is now very much focused on supporting and in many cases, delivering revenue and customer lifetime value (CLTV) objectives. Understanding these objectives as you plan for next year simplifies the process of developing your marketing strategy, tactical plan and budget.

Step 1: Define your revenue objectives for the next year.

Step 2: Define your CLTV objectives for the next year.

For both of these objectives, it’s essential to define the metrics that will show whether or not you are tracking to plan. If you are like me, you have probably fallen victim to dashboarditis and are awash in so many metrics you can’t see straight. Now is the time to jettison any metrics that are not critical to measuring performance. 

Step 3: Define the minimum number of metrics/KPIs needed to assess your performance.

Step 4: Define your current and desired KPIs so you know what you need to achieve.

Baseline: Programs, Technology, People

With business objectives and metric goals in hand, let's look at the programs needed to support those objectives. For revenue, you are looking at customer acquisition and everything that supports it (awareness, lead gen, nurturing, conversion). For customer lifetime value, you are most likely looking at customer engagement, retention, loyalty and advocacy, each of which will have a variety of sub-programs. 

Before you let the creative juices flow and start dreaming up new programs, establish a robust foundational baseline. Look at your existing marketing programs. What's working? What isn't? Eliminate any that aren’t performing or don't have the potential to deliver the metrics you need. Set aside the money from eliminating these programs for future initiatives.

Step 5: Eliminate marketing programs that aren't performing. Save the money for future initiatives.

Now take a hard look at your technology. Technology is consuming more and more of the marketing budget. As technology costs increase and marketing programs become more dependent on technology, it's critical to have centralized oversight of all the technology that supports sales and marketing. Start with a technology audit. Uncover all the tools and technology — both acquired and internally developed — in use across the organization.

Step 6: Conduct a technology audit.

Step 7: Eliminate duplicate products, contracts and functionality. In my experience, this will likely yield a technology expense saving of roughly 20%. Put that money aside for future initiatives.

Step 8: Look at each piece of technology, define its function, and determine whether it is achieving its objectives. Keep the technology that’s performing.

Step 9: For technology that appears to be performing badly, determine if it is genuinely not performing or if it's an issue with feature utilization or team skills. Eliminate technology that is not performing. If a product has not been fully utilized, create a first-quarter objective to increase the utilization of the product to see if that positively impacts performance.

Step 10: For the technology you keep, make sure integrations are in place so data flows through the technology stack to support your marketing programs.

If you don’t take control of your technology and commit to creating a solid foundation, it will be difficult to add to your technology suite and achieve meaningful results.

Now your team. As harsh as it sounds, if you have team members who are not performing, now is the time to let them go. Most of you are probably on top of poorly performing employees, but are you on top of your internal skill proficiency? Now's the time to make sure the skills you have internally are aligned with the programs you plan to initiate and the deployed technology. If you haven’t done so already, complete a skills audit for your entire organization to assess where training is needed. Take some of the money from the programs and technology you eliminated, and put it towards training. Your goal should be to go into the new year with the best team possible.

Step 11: Dismiss poorly performing employees.

Step 12: Establish a training plan for your team to ensure everyone has the skills they need.

So much of planning and budgeting stress comes from fuzzy objectives, the wrong or too many KPIs, and trying to add programs, people and technology on top of a poor foundation. Establishing clear objectives, the right set of KPIs, and a robust program, people, technology baseline will make it infinitely easier to plan for the coming year.

Related Article: How Scientific Can Marketing Be?

Measurement: Customer Acquisition Cost Above all Else

The last piece of the stress minimization program is to make sure everything that needs to be measured can be measured. This starts with the KPIs but extends to programs, people and technology. Now’s the time to put the structure in place to attribute program performance to business goals. A number of products on the market make it possible to do this with varying degrees of sophistication. 

The same goes for technology: you should be managing technology both holistically and at the component level. There is no excuse for not knowing whether a piece of technology is contributing to achieving business objectives. In our rapidly evolving technology and marketing environment, skill development and management must be a core focus for any marketing manager. Without the right skills in place, programs will fail, and technology will lie dormant.

Step 13: Ensure that everything that needs to be measured can be measured. This includes people, programs and technology.

In defining KPIs, one of the most, if not the most important KPIs is the Customer Acquisition Cost (CAC). If your CAC is higher than your CLTV you do not have a business. The smaller the CAC, the more profitable your business is, and the sooner each customer becomes profitable. This is true no matter the industry, business type or size.

Companies take a variety of approaches to calculating CAC. The three options are:

  1. Marketing costs to acquire customers/# of customers acquired over a defined period of time.
  2. All marketing costs/# of customers acquired over a defined period of time.
  3. All marketing and sales costs/# of customers acquired over a defined period of time.

The first option is the most complicated because you have to parse out what people, programs and technology are assigned to acquisition, and that’s not always easy. I prefer option #3 — it will give you the biggest number, but it ensures everything is captured. It's also the easiest to calculate. The CAC as a number is in itself meaningless, it only has meaning when compared to the CLTV. You should care about whether it is significantly less than the CLTV and if it is decreasing over time.

Related Article: The 4 Factors Defining Marketing's Future

A Final Consideration

Everything I’ve related above will help make it easier to prepare your annual plan and budget. Another factor which will help in achieving objectives is ensuring the right workflow processes are in place across the organization. As you work through preparing your annual plan and budget, take the time to identify any bottlenecks or process problems in the organization — and then work on getting those fixed before the new year.

On to the Future

With all the prep work done, you can now take the money you’ve saved and any additional funds you’ve been allocated and build on the solid foundation you've created. It’s time to consider the possibilities of new opportunities: the launch of new products, expansion into new markets, targeting a new demographic, opening new channels, and potentially embracing something new like Cause Marketing to support customer loyalty initiatives.

Hopefully, these final few months of the year won’t be entirely stressful. But if you are someone who is always stressed, may I gently suggest adding meditation into your routine?

See you on the other side when budgets are done, plans are made, and all we are worrying about is that we’ve eaten too much over the holidays!