How CMOs Can Defend Marketing Dollars in a Time of Dwindling Budgets
Gartner’s 2023 CMO Spend and Strategy Survey revealed a stark reality: 71% of CMOs believe their 2023 budgets are inadequate to fully realize their strategies. And a significant 75% are grappling with achieving more with fewer resources, leading to 86% of marketers feeling the need to overhaul their marketing operations to ensure sustainable outcomes.
Subsequent rounds of budget cuts have also disproportionately impacted marketing teams. Marketing is usually the first to experience cuts because it’s often easier to cut programs than people (and rehiring is seen as more challenging and costly than bringing spend back online) – leaving many marketing departments relatively overstaffed and with diminished program budgets, and unable to deliver on targets. This ultimately causes the company growth to suffer and, if not handled properly, can begin a spiral of more cuts and even slower growth.
So why is it so hard for CMOs to defend their budgets, and what can CMOs do to change the conversation?
Why Defending Budgets is Hard
The challenges around marketing budgets are rooted in a lack of understanding across the C-suite and boardroom regarding the intricacies of marketing as well as the inherent difficulty in measuring marketing’s impact.
Stakeholder Knowledge and Patience
Other executives, especially those from non-marketing backgrounds including the CFO, may lack the understanding or willingness to dig into the details of marketing, leading to strained relationships and challenges in defending budgets.
Measurability of Marketing
Put simply, marketing is hard to measure – and it’s getting harder. Back in my Marketo days, I could generate an MQL and pass it like a baton to an SDR, who in turn would pass it to sales as a marketing-sourced opportunity. In this world, it was fairly easy to show how more marketing investment would generate more MQLs, more pipeline, and more revenue (and conversely, how less budget would lead to less revenue).
But buying today is much more complex – including larger buying committees, orchestrated account-based motions, and longer sales cycles. This leads to attribution squabbles about whether any given opportunity is marketing-sourced, sales-sourced, or partner-sourced, and makes it hard to tie any specific marketing touch to a buying committee making a purchase decision down the road. And yet, without that ability, marketing can’t directly show how changes to the marketing budget will lead to changes in revenue.
Long-Term Brand Investments
As I wrote recently in The Marketing Playbook I Helped Create Doesn’t Work Anymore, today’s complex buying environment makes investment in brand-building increasingly essential – yet brand investments present a unique challenge in measurement and defense. The desire of many CEOs and CFOs to focus on highly measurable demand generation leads to underinvestment in brand and everyone vying over the same five percent of in-market buyers.
Asymmetry of Visibility
Marketing activity is easy to see and measure (costs going out the door), but Marketing results are hard to measure. In contrast, Sales activity is hard to measure and the costs happen automatically via payroll, but Sales results (revenue coming in) are easy to see on every dashboard. Is it any wonder, then, that Sales tends to get the credit for revenue, but Marketing is perceived as a cost center?
Strategies to Defend Marketing Investment
In my discussions with B2B CMOs, I’ve heard various strategies for defending marketing investments, from demonstrating the influence of marketing and aligning budgets with business objectives to fostering collaboration with sales and utilizing benchmarks.
Demonstrate Marketing Influence
Despite acknowledging the inaccuracies mentioned above, many CMOs nonetheless continue to use Marketing-Sourced Pipeline to demonstrate marketing’s impact. It’s flawed, they say, but still better than nothing. Other CMOs said it’s easier to claim credit for marketing influence on deals than sourcing. They said that as long as marketing played a role in any stage of the deal, whether it was finding the lead or speeding up the sales process, then marketing deserves some credit.
Align Budgets with Business Objectives
Another tactic is to set budgets around target market segments and specific business objectives, rather than by channel and tactic (such as events and content syndication). For example, “increase Enterprise growth by X%”, “grow the new AI product by Y%”, and “expand pipeline in Europe by Z%”. Some objectives and segments will get above average investment and some will get less. This discussion aligns stakeholders and frames the discussion around the goals the business cares about rather than detailed marketing tactics.
Collaborate with Sales
When sales leaders advocate for marketing budget, it strengthens the case for marketing investment. This is especially powerful when the sales leader knows that without marketing, reps won’t have the pipeline they need to be successful – so it’s better to invest in incremental marketing than incremental reps who would just miss quota. Also, sometimes a unified budget for Sales and Marketing can allow for dynamic investment allocation based on market demands and buyer behavior. When SDRs report to Marketing, it allows them to move budget between programs and SDRs based on what worked best.
Benchmarks can be crucial in budget defense. Benchmark data such as Total Marketing Spend vs. New Logo Bookings and Marketing as a % of Sales & Marketing, show how your investment stacks up against others. And if you are significantly below the benchmark, they can help make the case for incremental investment (though note that benchmarks represent averages, so you may need above-average investment to get above-average performance).
Market Your Marketing Internally
Many marketers excel at external marketing but fail at marketing their efforts internally. Regular communication about marketing’s achievements and strategies keeps everyone informed and shows how marketing strategies align with business objectives. Educating fellow execs on the multifaceted role of marketing can help them see that marketing involves a series of steps and strategies, not just isolated tasks. The most successful CMOs present this information not only at board meetings, but also at quarterly QBRs and 1:1 with fellow executives. While that sounds like a lot of work, the consensus is that it’s an essential part of the modern CMO’s role.
Avoid Cost-Based Framing
I encourage marketers to avoid ‘cost per’ metrics of any kind (e.g. “cost per lead”). That frames the budget conversation around cost, which leads to people viewing marketing as a cost center. Instead, I prefer to frame the marketing budget as an investment and I talk about metrics such as investment per opportunity or investment per pipeline dollar. It’s a subtle psychological shift that I encourage others to consider. Similarly, I try to avoid discussion of what I call “boiler room” metrics that matter to marketing but not other executives, e.g. specific campaign results such as ad conversion rates. Keep the discussion focused on metrics that matter to the business such as pipeline generated and revenue influenced.
The Need for Common Metrics
The need for marketing to defend itself to finance is a unique challenge, one not reciprocated by finance to marketing. Perhaps introducing “Generally Accepted Marketing Principles” (GAMP), analogous to the Generally Accepted Accounting Principles (GAAP) used by finance, would help. It would give us a set of common metrics and ways to talk about our results that would be shared and understood by all executives across companies. While nothing like this exists today, it would go a long way towards building marketing credibility.
The challenges CMOs face in setting and defending marketing budgets are multifaceted, stemming from a lack of understanding of the complex ways marketing influences revenue and the resulting difficulty in showing how marketing investment translates into business outcomes. By employing strategies like demonstrating marketing influence, aligning budgets with business objectives, collaborating with sales, leveraging benchmarks, and staying strategic in discussions, CMOs can more effectively defend their marketing investments and contribute to the overall success of their organizations.
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