Marketing budgets are stagnating. For example, 51% of B2C companies and 45% of B2B companies are spending the same amount of money on marketing in 2023 as they did the previous year.
Worryingly, an additional 23% of B2C companies and 21% of B2B companies actually reduced their marketing spend. This data highlights the problems many cash-strapped organizations are facing right now.
As a chief marketing officer, your job is to ensure your teams have enough budget to reach the many goals your organization needs to reach. You always want to ask for more, but it can be tough – especially if your organization is aiming for greater efficiency and less spending across the board. But, with a little know-how, you can justify the money you require to achieve your marketing goals.
1. Align your marketing strategy with your company's goals
The first step in the process is to align your marketing strategy to the company’s goals. Are you aiming for an initial public offering next year? Your marketing budget should support the key ratios that investors will be looking at. If you are aiming to increase the share price, how can your marketing efforts make an impact?
When your marketing strategy can show how it will help the business reach its goals, your budget will naturally be all the more compelling. This is where marketing and sales work hand in hand.
Let’s say your company plans to launch products in new regions next year. You’ll want to ensure that your marketing budget has allocations for educating the new market, adjust existing assets to account for new languages or currencies, reallocate spend to make sure this new market is supported, and more. If your strategy doesn’t account for the planned expansion, other executives will be wondering why you’re so out of the loop.
Additionally, while it might be high-level strategy, numbers and data are still your best friend. You should be able to provide projections for how marketing will contribute to reaching each goal.
Let’s use our example of the globally expanding company. Other executives (each with their own budget asks) and board members will question why you can just expand to a new market with the same overall budget as last year. They may argue that you should be driving efficiency in existing markets, while setting aside 20% or so of your current budget for the new market. If you want to contradict that opinion, you’ll need data.
Have the numbers ready
That also means you need to have an accurate cost of all your planned projects, always on initiatives, and more. Plus, be sure to point out any incentives (back up by data) for increasing spend for ongoing activities. Perhaps you run some marketing mix modeling and determine that a 3% increase in broadcast marketing will increase overall revenue by 7%. Be sure to bring those numbers.
Remember, board members aren’t investing in the company out of the goodness of their heart. They are expecting some form of return – either through dividends, long-term appreciation of their asset, or short-term growth in share valuation. It’s in your best interest to show that you're acting in theirs. Board members need to know that any extra investment will be well worth it.
And, while it may not be quite as compelling as hard data, be sure to highlight any industry research that backs up your arguments. This is especially helpful in highlighting trends or competitor moves.
2. Work with your team on the plan and marketing budgets
In order for your marketing plan and budget to be effective, it needs to be realistic. Your plan won’t do any good if your marketing team doesn’t believe in it or can’t reach the stated goals. That means you need to communicate with your team ahead of time.
From SEO specialists to content creators, you’ll need their input as to how they can contribute to the high-level business goals. Collect their input and ideas, then ensure they commit to those plans. Your “boots on the ground” will likely have the best perspective on the amount of effort and spend that is actually required for all of the planned initiatives. This results in a more accurate overall strategy and budget.
Take your analytics specialist, for example. They may know that the organization will need a tool like a marketing data hub to accurately track performance – a granular detail you may not be privy to. They may also have an idea of cost ranges and the best solutions, giving you an insight into budget allocation for new tools.
If you’re new to the CMO role, you may want to consider inviting senior members of your team to the budget presentation. Particularly for areas or technologies you are less comfortable with, those team members can provide valuable context and delve into the numbers in more detail, if required. Do this sparingly and only as needed, though.Ask your team these questions:
- What can you do to help us reach these numbers?
- What new tools or additional headcount will you require?
- How can we make better use of the tools and people we have?
- Are there any special projects you are aiming to launch next year? If so, how do they help us reach our goals, and what is required?
- Where are we starting to see diminishing returns in our current spend?
3. Be able to explain budget allocation across channels and tactics
Once your team has provided their input, you’ll need to start setting budgets across your various initiatives. The board may likely want to see that you have a planned spend down to each channel and tactic (even if they don’t, it’s good to aim for this level of detail).
This requires a fair bit of work. Historical data can help you make more accurate predictions and even model outcomes. Still, setting those spend limits is a balancing act. You want to give your team everything it needs, but you need to make sure spend is strategic, without waste, builds toward company goals, and meets return expectations of investors.
Even presenting your budget allocations can be a balancing act. The board needs to understand that you know your plan and numbers inside and out, but they don’t want to listen to every dollar going to each ad platform. Instead, try to express your costs as percentages (i.e., 10% toward SEO, 15% toward social media, 15% toward email marketing, and so on).
Presenting so many numbers and data points can become overwhelming for anyone (yes, even a board member), so be sure to make use of great visualizations. In those charts and graphs, be sure to draw attention to increases in performance and points of return for investors.
Accounting for every penny in your budget proposal is something many first-time CMOs forget when presenting to the board. Consider all the costs involved in executing a strategy, including salaries for existing and new talent, consultant and freelancer fees, technologies, website, and research costs.
Pro tip: Also set aside some budget to allow for market fluctuations and new opportunities.
Related reading: How to allocate your digital marketing budget across channels
4. Support budget decisions with competitive analysis
As we've mentioned, you need to be focused on where the business is going, but you also should keep an eye on competitor activity. While they shouldn’t dictate your strategy, it helps to be aware of their plans so you can react and compete aggressively. But how?
The truth is that it's impossible to know exactly how much money competitors are allocating to their marketing campaigns. However, you can guess their expenditure with competitor analysis tools like SEMRush and Ahrefs. These tools provide insights into the types of channels other companies in your niche use and any threats or opportunities in the market. You can also use them to check out your rivals' websites, social media profiles, and other online properties.
This insight into competitor activity can help advise your strategies and serve as backup when justifying your spend to the board. Essentially, applying some game theory to your strategy and spend is best practice.
Showing the board that you have gamed out a few different scenarios can earn you goodwill. Plus, identifying competitor activities can help justify some spends on new technologies and initiatives – so long as they help to still reach those main business objectives.
Just take one look at AI. Its mere mention in investor presentations can move the share price. When the ed-tech company Chegg announced Chat GPT was eating their business, their share price plunged by 50%. Conversely, AI was famously mentioned more than 140 times in its 2023 I/O keynote.
While some trends may be passing fads, others can move markets. It’s critical that your plans (and budget presentation to the board) take these shifts into account.
5. Measure and track the impact of marketing activities
Performance is only as good as your ability to measure it – historically and into the future. And your ability to justify future spend will depend on your capacity to measure performance.
When it comes to comparing marketing performance against business objectives, not all measurements are created equal. You will, of course, have a few KPIs that you’ll need to work toward. Often, these will be dictated by the main goals. Marketing’s contribution toward those KPIs can be expressed a few different ways, depending on that main KPI.
Brand awareness
Say you’re that company entering a new market. In addition to pure revenue, you may also need to show an increase in brand awareness. A basic way to express this is by highlighting website traffic to your website in the region. However, this can be a bit of a “fluffy” number that can become easily inflated or manipulated.
A savvy board may want to see a more sophisticated measurement of brand awareness. In that case, you may need to invest in capturing your net promoter score within the region.
Customer acquisition cost
Particularly for businesses seeking to drive efficiency and prepare financial statements for new investor rounds, reducing your customer acquisition cost can be incredibly helpful to highlight. This metric can help inform several performance indicators including marketing efficiency ratio.
A great CAC becomes even more valuable when you pair it with an equally healthy customer lifetime value. Together, these can tell your board that you're achieving marketing efficiency at both ends of the customer journey.
Customer retention
Much like lifetime value, a great customer retention rate can speak to the health of a company’s goods or services. Particularly in SaaS and subscriptions-based models, great customer retention means continuing annual recurring revenue – a key metric for investors. To achieve this, though, will likely require some form of investment in a customer lifecycle plan (read more about customer lifecycle marketing on the blog here). By connecting these types of initiatives in your budget to an investor-friendly metric like increased ARR, you’re indicating that you have your board’s interests in mind. It also makes it a harder case to deny the budget allocation. After all, what investor is going to shelve a plan that can increase valuation?
Again, each of the metrics requires good measurement, which itself requires great tools – perhaps even a marketing data hub.
6. Be prepared for pushback
Let’s face it, your budget is going to face pushback. If you want that money, you’re going to have to work for it.
Some board members may try to poke at your strategies to see if there are any weak points. Others may ask a very interesting question that throws you off your game. Others may question your approach simply as an ego play.
Regardless of the situation, it's your responsibility to prepare for any scenario so you can handle it with agility and grace. Most often, the toughest questions are designed simply to ensure you’ve thought through as many scenarios as possible. This stage is something that’s very hard to teach, and is often learned through real-world experience.
The key is to stay flexible. Very rarely will you be granted every dollar you ask for. Many times, the board may need to prioritize other initiatives in different parts of the organization.
For instance, a company gearing up for an IPO may need to focus on IT security improvements or focus on projects for the finance team. As always, it’s best to counteract the pushback with hard data that supports your anticipated performance gains.
Sometimes, though, all the data and hard evidence in the world isn’t enough. And that’s ok. That just means you may need to adjust expectations and projected performance to suit.
You should be especially ready for pushback on new or unproven tactics, too. In this scenario, you won't have any in-house data to fall back on, so you'll need to prove the value of your chosen marketing activity another way. Again, research, competitor analysis, and case studies can all support your case.
7. Regularly report progress and results to the board
Let’s imagine the dream scenario: the board approves every single item in your budget. Amazing! Your work isn’t over, though. It’s just the beginning.
You'll need to continuously monitor KPIs and share intelligence with other members of the executive team. In regular board meetings, you’ll need to demonstrate that your strategy is following your projected performance curves. During this process, you're demonstrating to the board that approving your budget was the correct move, and you’re building trust in your case for next year.
Be sure to also report when your marketing team reaches a particular milestone or accomplishes a major goal, such as converting your 1,000th customer.
Again, lean on your learnings from every step in this process. Base it on the business goals, bring hard data, and use great visualizations to quickly tell the story.
8. Justifying your marketing spend in a tough economic climate
It's difficult to ask for any budget increase during a turbulent economy. Of all the areas of a business, marketing is often the toughest to justify. Many investors view it simply as an expense, which is why it is often the first area to face budget cuts when bear markets emerge.
All hope is not lost, though.
To explain the value and necessity of continued marketing investment to your board, it may help to go back to game theory. What are your competitors doing during these downturns? You can’t expect them to turn off their marketing expenditure just because you are.
In fact, according to a recent Nielsen study, brands that pulled their US television advertising during a recession could expect to lose 2% of their long-term revenue each quarter. Additionally, it could take three to five years to recoup that revenue. That’s a significant lose in market share for turning off just one channel.
Instead of drastic cuts, you could make the case for smarter and more efficient spend. Some marketing mix modeling may be able to identify these efficiencies and help you make the case for maintaining (or even increasing) marketing budgets in tough economic conditions.
If budgets do get slashed, maintain your flexibility and adapt to your new normal. Focus on your highest priorities and communicate any changes in performance expectations. According to that same Nielsen study, 75% of recessions end within a year, and 30% of all recessions end in two quarters. You’ll see daylight again soon.
Related reading: Expert tips to protect your marketing budget
Our own CMO's expert advice
While these best practices can set you up for success, it's also great to hear which strategies work from someone who has been there before. That's why we sat our own CMO and co-founder, Pelle Made, down to pick his brain. We extracted his strategic tips and potential pitfalls that every CMO (or aspiring leader) should be on the lookout for.
The best part? We've distilled everything in this easy-to-read guide.
Click on the image above to download your copy of the PDF
Justify your marketing spend with data
Learning how to justify your marketing budget to the board can be difficult, especially if you’re a first-time CMO. You'll have big plans for your department and know which channels and tactics you want to focus on. However, you'll need approval from a handful of other board members before making your dreams come true.
Getting buy-in from the board is a lot easier when you have data to back up your budget proposal. Demonstrating results through original research, case studies, and competitor analysis can also assist. Focusing on the business’ KPIs can convince the board that your marketing activities will generate great returns. Just don’t forget to provide regular feedback to your stakeholders.
Of course, turbulent economic climates can make justifying marketing budgets a lot harder. However, arguments and budgets supported by data will almost always win out over those that are not.