Budgets, especially Marketing budgets, face constant scrutiny. This is even more true when the Marketing budget is essentially a bill of materials, meaning the costs associated with public relations, events, collateral, and so on. When this is the case, the C-Suite often perceives the budget as a cost rather than an investment.  One of the reasons is the lack of understanding between the bill of materials and the results they produce. Let’s explore how CMOs, CGOs, and CROs can change the conversation about budget to reduce the odds of facing the chopping block.

Create Your Budget Against Results

Here’s a novel idea. Establish a budget and allocate the dollars against the results you are trying to produce. This is the first step in transforming the perception of Marketing’s activities from a cost center to an important investment in the growth of the company.

Of course, you need dollars to execute public relations, marketing programs, events etc. These activities will still be essential components to your programs, strategies, and objectives. The change in approach to allocate of your dollars against how these activities will increase results such as share of preference, accelerate net new customer acquisition, facilitate new solution adoption, expand the footprint among existing customers, and  so on. When the budget and  Marketing are aligned with meaningful business results, the budget conversation between Marketing and the business changes.

Change the Budget Conversation With the C-Suite

Imagine a different conversation with the CEO, CFO and other members of the C-Suite. Rather than justifying the dollars you need to fund that public relations initiative, trade show, or email campaign, your conversation turns to how those funds will move mission-critical business needles, such as X number of customers retained or X increase in market share, or X growth in your category. This is the language of the C-Suite. Once you begin speaking C-Suite language the conversation is less about justifying and more about changing or even increasing your budget to achieve performance targets. You are now in an entirely different conversation.

Let’s move from the hypothetical to an example. Let’s say you want funds for a customer acquisition program. Imagine a fairly well-established company that needs to acquire $5 M in revenue from new customers from an existing product line.  Based on an average order value of $50,000, the company calculates it needs to acquire 200 new customers. The company is willing to spend $1,000 in marketing to acquire each customer. A budget of $200,000 is established to market to new customers and divided among the programs designed to generate awareness, interest, consideration, and preference. 

The conversation is no longer about being over or under budget, but rather about hitting the 200 customer acquisition target. If the budget changes, then the conversation is about the impact of this change on the acquisition target. If the programs associated with this performance target are not producing the desired results, the conversation then turns to what must change to achieve the target.

Purchase Your Assessment

As the company becomes more efficient at customer acquisition, whether due to product improvement, more sales experience, and of course, the outstanding acquisition campaign you executed, the cost of acquiring a customer for a specific product line should decline. This is good news. As you demonstrate the success of your activities, new dollars are then allocated to other initiatives, such as increasing the number of products per existing customer.

The beauty of this approach is that it keeps everyone focused on what generates revenue: customers. Remember, for Marketing it is all about counting customers.

We get it. This approach might not necessarily support traditional accounting systems.  Engage in a conversation with your Finance team about this approach. Your Marketing budget shouldn’t be designed to support an accounting system. They should be designed to support the initiatives of the organization. By moving away from activity-based budgets to budgets grounded in customer-based metrics, not only will the conversation change, but marketing will demonstrate its value as a key player in the company’s growth and success.

You will need to take certain steps to gain the blessing from your CFO.

Five Tips to Ensure The C-Suite’s Blessing For Your Marketing Budget

To gain blessings from the C-suite, you must present a tangible return using metrics they understand. This isn’t always the magical ROI calculation. Yes, you will need that but you will want to make sure you consider return beyond immediate ROI. CEOs expect CMOs, CGOs, and CROs to create value, accelerate growth, and improve the organization’s competitiveness. 

Use these five tips to ensure that your Marketing budget will receive the necessary blessings:

1. Treat the Finance team at the very least as an advisor and ideally as a partner. Never as an adversary. They have their job to do, and things will go much better if you can help them do it. They want the organization to be successful.  Help them help you. Multiple variables influence the outcome of a Marketing strategy. The goal should be to concentrate on establishing the combination of those variables that will produce the desired business outcomes from which financial value will be created. Making time to engage in this conversation with Finance will go a long way toward improving the quality of the relationship.

2. Speak the language of business. Forging a strong partnership will help you make some headway. Speaking their language will take you even further.  When it comes to Marketing, we tend to talk like marketers, using language such as response rates, engagement, leads, etc. Business people talk and think in terms of growth, category ownership, customer lifetime value, share, revenue, profit, value, etc. Sometimes, even when we use the same terms, we may not be saying the same thing. For example, consider the term “brand equity”. The Marketing professional uses the term to describe the health of the brand’s franchise with its key audiences; the financial professional uses it to characterize the brand as an economic asset. Whatever their differences, CMOs, CGOs, CROS, and members of the C-Suite need to find common ground.

3. Work within the C-Suite’s comfort zone. Business is run by numbers. Therefore marketers need strong data, analytics, and metrics skills. Collaborate with the C-Suite to identify the Marketing measures and metrics that will provide a reliable indication of a brand’s ability to generate future cash flow (the criterion for regarding the brand as an economic asset). Focus the metrics on conditions under which initiatives will contribute to growth in the bottom line, not just a temporary increase in the top line.

4. Frame your investments in terms of business value. Business leaders have well-developed ideas about what value is and how it should be measured. Marketing and other professionals responsible for customer acquisition and customer retention typically think of value as a customer concept. Value represents the ratio between the perceived benefit that a product or service offers and its cost to the customer, making it a concept external to the customer. Other members of the C-Suite, especially the CFO, link value with the concept of value creation.  They want to know the answer to the question,  “Does this activity earn a sufficient return on our investment? Viewed from this perspective, value is a financial concept internal to the company.

5. Quantify your impact. Come prepared to describe the financial impact that will result from the investments you are making on behalf of the organization. Think like a portfolio manager: why buy one thing and not another, why buy more, why sell (or stop selling) something? Focusing on the customer benefit alone risks bankrupting the company. Focusing on minimizing the cost base for a given customer benefit may improve short-term profitability but leaves the company vulnerable to a competitor who redefines the customer value equation.

Your Marketing Plan should encompass these five tips and directly link the work and investments of Marketing to business outcomes. Not sure how to do that? We have a patented methodology that makes creating a customer-centric outcome-based Growth plan easy and affordable. 

FAQ:

1. Partner with Finance and help them succeed.
2. Speak business language focused on growth, value, and profitability.
3. Work within the C-Suite’s comfort zone using reliable data and metrics.
4. Frame investments in terms of business value and return on investment.
5. Quantify the financial impact of Marketing initiatives like a portfolio manager.

Comments are closed.