We've reached the midway point of the year. The time when people take vacations, travel to warm beaches and ... start their planning and budgeting processes for the coming year.
For marketing departments, they're doing this in the face of increased responsibilities in three areas:
- Brand responsibilities — which encompass overall customer experience
- Strategy responsibilities — which now encompass digital transformation and
- Funnel responsibilities — which extend from lead generation to customer acquisition and beyond.
So given the heightened responsibilities and the heightened expectations these responsibilities create, marketers must have more than enough funding to achieve their annual goals, right?
Not so fast.
Marketing: Trying to Do More With Less
Surveys indicate the marketing budget as a percent of revenues generally ranges from four to 24 percent, depending on a number of variables including: industry, company size, components of the budget (some don’t include people expenses), stage of growth and the degree to which marketing is responsible for revenue generation.
In my ideal world, more and more of the company budget would be allocated to the marketing organization — but that doesn’t appear to be the case. Some surveys suggest budgets are modestly increasing while others report they remain flat.
Regardless of budget allocation, I’ve yet to meet a marketing leader who believes they have enough funding to achieve their annual goals. The reality is, most marketing organizations are perpetually trying to do more with what they have and are continually working to balance expenses across programs, technology and personnel.
So what's a CMO to do?
Design Your Marketing Budget
The Program Budget
Business and marketing objectives should drive any marketing program strategy. Are you targeting new markets, new product categories, trying to drive revenue for established products? With objectives in hand you can frame a program and marketing channel plan.
For early stage companies working with a blank slate, searching “marketing budget allocation” yields a tremendous amount of survey data about where companies are allocating their program dollars. This data can provide a starting point for planning initial allocations.
The good news is we’ve reach a level of sophistication with analytics that we can now assess the value and impact of most marketing programs, discard the ones that aren’t performing, and fine tune the ones that do. Allocating 10 to 15 percent of the marketing program budget to test new programs provides a low-risk means to create a queue of new programs to cycle in as existing programs lose momentum and performance degrades.
The Technology Budget
Our approach to technology spending is improving as well.
Over the last two years I’ve seen companies place an increased emphasis on oversight and discipline around technology procurement as they work to map a coherent strategy for digital transformation. Most companies have locked in a CRM system. They have, or are working towards, selecting a Customer Data Platform (CDP). And most have one or more marketing automation platforms in place (note: our CabinetM data shows it is not uncommon to have two marketing automation platforms in one environment).
Companies tend to surround these marketing technology anchor platforms with edge systems that integrate with one or more of these platforms to provide added value, and also a large number of non-integrated function-specific products. I see companies setting priorities for big system purchases and allocating as much as 20 percent of the technology budget for testing and trying new point products.
The key to mapping a technology strategy is aligning technology priorities with program initiatives and priorities. Trying to establish two isolated and independent budgets is a recipe for disaster and frequently leads to renegade tactical technology spending to support specific program initiatives.
The Personnel Budget (Specifically Technology Skills)
Personnel planning as part of the budgeting process and marketing strategy has become hugely complicated. We’re used to mapping organization charts and describing marketing skills in a functional manner — creative, content, strategy, advertising, SEO, lead generation, nurturing, acquisition, engagement, retention and analysis etc. But along with these functional skills, we need technology literacy and expertise.
All too often these requirements are an afterthought in the planning and budgeting process. In the last three months I’ve had three different CMOs tell me they were caught out by the resignation of a key employee, only realizing when it was too late that that employee was the only person in their organization capable of managing their marketing automation system.
We spend significant time A/B testing programs and qualifying technology, yet fail to ensure we have redundancy in capabilities for our large, expensive, critical systems. Too often we assume technology failure is our single biggest risk item, when it may be lack of technology skills. What do you do when the only person who knows how to run one of your anchor platforms walks out the door?
At CabinetM, we spend a lot of time talking to organizations about their marketing stacks and increasingly those discussions lead to a conversation about technology skills. We haven’t met an enterprise organization yet that has a firm grasp on their internal technology proficiency.
Operating blind with regard to technology proficiency can lead to lack of redundant skills for critical systems, improper technology utilization that impacts the ROI for any technology implementation, and an inability to adopt new technology due to lack of the necessary skills.
Managing Your Skill Profile
As part of the planning and budgeting process it is critical to align skills with programs and technology requirements. We recommend organizations profile their internal skill proficiency by asking each member of the marketing organization to document their product knowledge and depth of expertise. With this in place it becomes easy to:
- Identify gaps and rectify potential critical points of failure
- Frame a training plan and identify goals for each member of the team and for each department
- Identify the important technology skills to advance your technology strategy
It takes time to maintain a skill inventory but it is well worth the effort and will ultimately eliminate those "oh s***" moments when you have to deal with employee resignations.
I recommend creating a central source of skills data for the entire organization, which a number of different departments can manage: Marketing Technology, Marketing Ops, Human Resources or IT. In mapping and managing your organization’s skills profile, don’t forget existing or potential agency/service provider partners. Numerous cost-effective specialist agencies can provide missing skills or act as back-up in the event you don’t have a redundant skill set for a complex system.
The Art and Science of a Marketing Budget: Making it Work
Creating the marketing budget is as much an art as a science. It starts with mapping business goals to marketing goals, then identifying the programs to support those goals. With programs defined, you need to develop the technology budget to support upcoming marketing programs, while at the same time laying the foundation for the next three to five years.
With technology and programs mapped out, develop your organizational chart and personnel budget to ensure your technology is fully utilized and you can deliver on programs. The next test is to ensure that what you've defined can also meet your acquisition, revenue and customer lifetime goals.
After all this, are you ready to submit your budget? No way! I can guarantee your bottom line number won’t come close to the budget you’ve been assigned.
And now your creativity is called into action. It takes multiple iterations and refinements to get to the place where personnel expenditures, technology and program spend align in a way that ensures you have the best shot of achieving goals.
Since there’s no guarantee that any program will work as projected, if you are like me, you’ll continue to refine and work to optimize while worrying about meeting goals. Though you can’t control for everything, you can do some very tangible things to help mitigate risks:
- Make sure programs, technology and headcount (skills) are rationally aligned
- Establish parameters for how you will measure a program or technology’s success
- Allocate budget for testing new programs and technology that can be introduced to replace programs that aren’t performing as expected
- Track internal skill proficiencies and identify training goals to ensure skill redundancy and advancement
- Leverage specialist service providers to augment internal operations.
And when you finish, go take that well-deserved vacation on a beach somewhere.