Is it the most wonderful time of year because football season is well underway? No.
Is it the most wonderful time of year because Halloween is your favorite holiday? Nah, not quite.
Is it the most wonderful time of the year for marketers? Kind of…
It’s marketing budget season! It’s that time of year (for those companies on a calendar year) where marketing plans are being finalized, and budgets are being reviewed (re-reviewed, and reviewed again) for the coming year. Many companies start the process soon after they begin actual marketing execution for the current year; and that means that right now, many of today’s marketers are in the throes of selling next year’s ideas and requesting investment. Oftentimes, the completion of that process and getting final budget approval secured could take until the end of the year. Is your head spinning yet?
Marketing teams will undertake varying levels of risk and experimentation in their approach to planning. As Steve Olenski, Forbes contributing writer notes, “Of course, you’ll also need a strategy for how to deal with changes. Your business might do exceedingly well one year; if your revenue doubles, your marketing budget may double as well. This is exciting for a CMO, but it also increases your likelihood of wasting money. It’s easy to get overexcited and start throwing money at new, riskier ventures, but it’s better to follow the same conservative practices that got you to this position.”
Marketing Spend: Where Do Today’s CMOs Stand?
Gartner research via Forbes shows that companies, on average, traditionally spend about 12% of their annual revenue on marketing, but that varies heavily by industry. For example, a 2017 CMO survey found that the education industry has the highest percentage of total revenue, at 18.5%, while mining and construction came in at the lowest, with 2%. Most industries fell somewhere between 6-11%.
In addition to budget varying by industry, it also varies by company. Budgets may increase or decrease based on strategies centered on market share, shareholder expectations, equity events, geographic expansion and product/service launches.
Allocating the Marketing Mix: The Tech Effect
Has this process gotten easier for marketers with the emergence of better technology supporting the marketing function? Yes and no. Marketers now use technology to quickly understand every facet of the marketing mix including documented KPIs, all things digital and measurable. They have access to customer engagement metrics on websites, social channels and at events. Brand preference and customer sentiment are tracked through surveys; and owned media, paid media and earned media programs are trackable as well. The good news is that marketers can show management how specific investments in specific programs are doing in-market and if they are worth investing in again the following year.
Here’s a dose of reality: Marketing investment and plan decisions are being based on program results data. However, reporting and lobbying for marketing dollars in many cases is still siloed, and responsibility can fall to different program leaders with a specific channel or area of focus (i.e. Brand, Email, Events, Sales Enablement, etc.). Adding to that, management has an annual range of marketing spend aligned with EBITDA (earnings before interest, tax, depreciation and amortization) targets. Even with these complexities, the annual budgeting process can get better and improvement opportunities still exist.
Marketing Budgeting…A Peek Into the Future Dream
In the future, technology across customer service, marketing and sales functions will be integrated and provide more accurate information to make decisions. In some instances, the technology will automate current manual tasks in setting and resetting digital campaigns. Companies will be able to have a complete view of the customer purchase journey from consideration to close. Every touchpoint will be catalogued and rated appropriately for its impact to the business. Marketing programs will immediately align with customer and prospect demands, and marketing investment will align accordingly. Silos of program reporting will be eliminated. Additionally, all sales activity and productivity will be integrated in real-time.
What does this ultimately mean? That the time it takes to do annual marketing program budgeting will certainly be compressed or eliminated altogether.
Tell us: what is your marketing budget experience like? How does your organization approach marketing planning for the following year? Share your thoughts in the comments or via social media on our Twitter, LinkedIn or Facebook pages.
Looking for support to navigate your planning process or new marketing ideas for the coming year? We can help you do that! Check out our services for more information.
Author: Jeff Rappaport, CEO & Founder of Outlook Marketing Services
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