C-Suite Agenda

3 Precautions to Take During Marketing Budget Talks

Marketing is the engine that drives sales. It builds awareness, increases visibility, nurtures trust, fosters loyalty, and can position a brand as the obvious purchasing choice. Just one problem — it comes at a cost. As department-store magnate and marketing pioneer John Wanamaker so aptly noted, “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.”

While more transactions move from in-store to online, marketing has the chance to become more transparent. It’s now much easier to tie sales back to marketing dollars and maximize your advertising investment on the channels with the most bottom-line impact.

With data, you can arrive at a better understanding of what does and does not work in the marketing space — and then let your spend reflect that.

Allocation Woes

Even with the aid of data, budget allocation can be a challenge for CMOs. Part of this is due to transparency. When reporting data isn’t clean, accurate, or readily available, it’s harder to push marketing budgets in the right direction. They’re left making assumptions instead of calculated decisions.

This can cause CMOs to chase every emerging platform or marketing channel. While it’s generally a good strategy to test different platforms consistently, it’s not a great idea to pull marketing spend from moneymaking channels. Follow the 80/20 rule: 80% of the marketing return should come from 20% of the tactics, so it’s important to make sure the marketing budget isn’t being reallocated to the next shiny object.

Besides, CMOs often deal with pressure from CEOs and other key stakeholders who ask questions like, “Why am I not seeing our ads?” To answer those queries, budgets receive sudden overhauls as money shifts toward more visible avenues — despite them not always being the best in terms of return on investment. After all, it’s less about how much you spend than where you spend it.

Further complicating matters is COVID-19. The pandemic has driven consumers online, and e-commerce sales are up 55% year over year, which has amounted to nearly $435 billion in online purchases. This shift has left many brands — at least those that lacked an established online strategy pre-pandemic — scrambling to adjust their ad spends. To stay afloat as this transition happens, use the information and data at your disposal to make these crucial marketing decisions.

An Ounce of Prevention

For businesses trying to catch up, arriving at the right ROI on several new online marketing channels all at once can be a struggle. It’s easy to spend marketing dollars ineffectively and inefficiently — especially if you’re making a big push in online advertising for the first time.

Those same mistakes can creep in when trying to allocate money for marketing spend. Even without a pandemic, questions circulate regarding where to direct funds. As you move money around, take the following precautions to sidestep serious miscalculations:

  1. Fill the top glass first. Think of a marketing program like a pyramid of champagne glasses. The top glass will represent the channel with the highest return, while those on the bottom make up your lowest ROI tactics. Make sure the top glass is full before a single drop of your budget hits any of the lower glasses.
  2. Balance spend across the marketing funnel. Using the champagne metaphor again, that top glass can grow with more awareness — and shrink with less. As such, balance your spend between high-intent customers more likely to convert while introducing new customers to your brand who can move down the conversion funnel over time.
  3. Set up a testing budget.In the evolving world of digital marketing, there’s always something new to try. One of these new initiatives may be your next best opportunity to reach an untapped market. Fill your top glasses first, of course, but set aside some funds for a separate budget to explore new areas, audiences, and tactics.

As with anything in marketing, you need to make sure any decision is backed up with the best information available. Before settling on a budget, CEOs should ask their CMOs how confident they are in the company’s data. One survey found that 54% of businesses have concerns about the quality of their data. Without clear visibility, you could end up allocating funds to channels with little return.

You might also ask which platforms and tactics you’re currently testing. If you’re not consistently trying new marketing avenues, messaging, and design elements, you could again find yourself behind the competition. What works today might not work tomorrow, and it’s vital to stay ahead of the curve in this crowded marketplace.

Budget allocation is never easy. It takes time, energy, and a wealth of data to arrive at the right mix. But as long as you devote enough money to proven channels, target the ideal audience, and set aside enough money to test and adjust routinely, you’ll be moving in the right direction — even during a pandemic.


Commentary by Owen Loft. Here’s what you’ve missed?
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Owen Loft
Owen Loft is a co-founder of Socium Media, a performance-focused digital marketing agency specializing in paid search, paid social, and SEO. Socium operates with one goal in mind — to grow your business. Owen Loft is an opinion columnist for the CEOWORLD magazine. Follow him on LinkedIn.
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